5 months ago

BusinessDay 08 Nov 2017


Wednesday 08 November 2017 C002D5556 BUSINESS DAY WEST AFRICA ENERGY oil gas power R POLICY Impending uptick in exploration activities with expected increase in 2018 CAPEX Page 5 Finance People Appointments NLNG awards $100,000 to three winners of 2017 Science Prize Page 6 OPEC weekly basket price DAY PRICE 3/11/17 58.67 27/10/17 56.34 20/10/17 55.72 13/10/17 54.41 6/10/17 54.38 Source: OPEC L-R: Dada Thomas, president, Nigerian Gas Association (NGA); Audrey Joe-Ezigbo, 1st vice president, NGA; Albert Akpan, chairman, senate committee on Gas & Frank Uzuegbunam, publicity secretary, NGA during a meeting at the National Assembly recently. Debrief Niger Delta militancy enriches other oil producing countries FRANK UZUEGBUNAM Last week, a militant group, Niger Delta Avengers (NDA), said it ended a self-imposed cease-fire and will resume its violent campaign. “Our operatives are intact and focused, ready to implement instructions,” the Niger Delta Avengers said in a statement on its website by a spokesman identified as Mudoch Agbinibo. “We can assure you that every oil installation in our region will feel warmth of the wrath.” The NDA, a militant group that last year claimed several attacks on infrastructure in the oilrich Niger Delta. “Our next line of operation will not be like the 2016 campaign which we operated successfully without any casualties. This outing will be brutish, brutal and bloody,” Agbinibo said. The NDA said it would target a floating production and storage facility under construction at a South Korean shipyard, to be operated by the Nigerian subsidiary of French supermajor Total. The militants accused President Muhammadu Buhari’s government of being slow to meet their expectations of more local control over the region’s oil resources. There was an immediate spike in crude oil prices following the announcement by the militants demonstrating the impact of the pronouncement. “Unlike many other militant groups that issue threats online, the Avengers’ announcement needs to be taken very seriously,” Malte Liewerscheidt, senior Africa analyst at Bath, U.K.-based Verisk Maplecroft, said. “The Avengers’ area of operations in 2016 was confined to the areas west of Warri between the Benin and Forcados Rivers. It is highly likely that any potential future assaults will take place within the same area.” West Texas Intermediate for December delivery advanced $1.10 to settle at $55.64/bbl on the New York Mercantile Exchange and climbed for a fourth week. Total volume traded was about 13 percent below the 100-day average. Prices rose as high as $54.84/ bbl. Brent for January settlement added $1.45 to end the session at $62.07 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.21 to January WTI. Just like the attacks on oil installations in past, other oil pro- ducing countries benefit from the spike in the oil prices resulting from the militancy attacks while Nigeria’s production output suffers. During the 2016 attacks, Nigeria’s output was cut to the lowest in three decades. The country suffered its worst economic downturn in a quarter century after oil prices crashed and output plummeted. Government estimated the attacks caused the country a loss of $7 billion in revenue. The Avengers’ attacks subsided after a truce with the group in August last year to allow for peaceful negotiations. Nigeria is a member of the Organization of Petroleum Exporting Countries, but is exempt from the OPEC-led effort to balance the oversupplied market with coordinated production cuts.

Wednesday 08 November 2017 02 BUSINESS DAY C002D5556 WEST AFRICA ENERGY oil Brief Nigeria: Samsung delivers Egina FPSO Samsung Heavy Industries (SHI) has delivered Total’s deepwater Egina floating production, storage and offloading (FPSO) vessel. The vessel was completed at SHI’s Geoje-shipyard under a $3 billion turnkey project, and set sail for Nigeria on 31 October 2017. It is due to arrive in Nigeria in about three months. There, the remaining topside module integration and commissioning will take place for scheduled delivery in 2H 2018. SHI won the order to build Egina FPSO in 2013. The FPSO is to be installed in Egina offshore field, 200km from Nigeria’s coastline. The 330m-long facility has 2.3 MMbo storage capacity with topsides weighing 60,000-ton. Total started the drilling program on the Egina field in December 2014. This intense project will keep two rigs busy for a total of Tullow Oil and partner Sterling Energy have decided to exit Block C-10 offshore Mauritania after determining the block’s prospects did not commercially justify a third phase of exploration. The joint venture submitted a notice not to enter the third renewal period for the block, which had a minimum work obligation of two wells. The companies 3,000 days. Five out of the planned 44 subsea wells have already been drilled, at water depths of between 1400m and 1700m, and 13 more will be completed when the field comes on stream. SHI has now fulfilled successful delivery or sailaway of three massive offshore projects as scheduled. Earlier this year Ichthys CPF, world’s largest floating gas processing facility, was delivered in April. Prelude FLNG, world’s largest FLNG, had left Goeje in June. Mauritania: Tullow, Sterling to exit Mauritania Block C-10 will have to pay the Mauritanian government a $7.5 million gross penalty payment for not meeting this minimum required work, Sterling reported in a press statement. The production sharing contract for the block was awarded in 2011 and set to expire on 29 November. The second phase of the production sharing agreement currently is underway, with a minimum work requirement of one exploration well. Block C-10 covers an area of approximately 10,725sq km in water depths of 50m to 2,400m with full legacy 3D seismic coverage. Sterling entered the block in June 2015 by acquiring a 13.5 percent stake. Improved third quarter results indicate oil leaving bearish territory ISAAC ANYAOGU The third quarter earnings of the five biggest oil companies seemed to be consolidating the notion that the oil sector is Snapshot 50% The average rise in net profit reported by five of the biggest oil companies in the world for the third quarter European refining margin indicator rose sharply to $48.2 per tonne in the third quarter of 2017 compared with $41.4 in the third quarter of 2016 thanks to strong demand for products after last month’s hurricane Harvey led to numerous shutdowns of refining capacity. “The downstream benefited from favorable refining margins and increased its results by 18 percent compared to the second quarter, despite the impact of Hurricane Harvey on American opmaking a recovery. From the results, all of the oil majors have reported as much as 50 percent increase net earnings. Royal Dutch Shell reported a near 50 percent rise in net profit for the third quarter. Net profit attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, came in $4.1 billion, versus $2.7 billion in the same quarter a year ago. This compared to a company-provided analyst consensus of $3.6 billion. It also beat the Reuters estimate which was $3.569 billion. Shell said the earnings reflected higher contribu- tions from its downstream and upstream operations (which refer to both the refining division and exploration units) and its integrated gas unit. American oil giants, Exxon Mobil Corporation announced estimated third quarter 2017 earnings of $4 billion, compared with $2.7 billion a year earlier as commodity prices improved and performance in the upstream and downstream strengthened. The world’s largest publicly-traded oil company credited higher quarter net adjusted profit for the quarter hitting $2.7 billion, as ramp-ups and new projects lifted production. High demand for petroleum products, the company said also led to a sharp increase in its refining margin. “A 50 percent increase in earnings through solid business performance and higher commodity prices is a step forward in our plan to grow profitability,” said Darren Woods, chairman and chief executive officer of ExxonMobil. ExxonMobil’s up- commodity prices in the third quarter, as well as better performance in it exploration and production and refining businesses. Italian oil giant, Eni which is about one-third government-owned, returned to profit in the same period posting earnings of $400 million, compared with a loss of 562 million euros a year earlier. Chevron, American multinational oil company similarly, reported net earnings of $2billion, compared with $1.3billion reported in the same period in 2016. French oil and gas major Total, reported a 29 percent jump in thirdstream earnings rose to $1.6 billion as oil prices hovered around $50 from about $40 in the same period last year. Analysts had expected poorer margins in the downstream as Hurricane Harvey was forecasted to knock out over 15 percent of US refining capacity which translates to about 2.45 million barrels per day which shut in after Tropical Storm Harvey flooded plants and shut seaports in Houston, the capital of US oil production. But margins held. ExxonMobil’s downstream results increased to $1.5 billion buffered by $380 million Canadian retail assets sale. Total said its erations,” said chief executive Patrick Pouyanne in a statement. These positive earnings recorded by oil majors raises the prospect that new projects will kick off and old ones may be completed. It is also cheery news for oil companies that have had to weather the storm posed by low oil prices amid a glut in oil supply and lackluster demand over the last three years. There are signs that oil markets are rebalancing, however, particularly as major oil exporters including OPEC and non- OPEC countries continue with an agreement to cut oil output.

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