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Tax reform, policy uncertainties to cause oil drop in Nigeria, WoodMac warns

A new report by consultancy firm, Wood Mackenzie, has disclosed that Nigeria’s crucial energy sector could experience a 35% decline in oil output.

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FG battles 6 oil firms for failure to remit N20 trillion , ExxonMobil, Shell, Chevron delay $58.4 billion oil and gas investment in Nigeria, Crude Oil: Nigeria’s oil production slips for the third consecutive month , Tax reform, policy uncertainty to cause oil drop as foreign firms look outside Nigeria, Nigeria plans to support oil price with lower production cost per barrel, Oil price slumps further to $30 pb, as Nigeria grapples with high production cost, Reduction in PMS: A nod to the deregulation of the downstream sector?

A new report by a research and consultancy group, Wood Mackenzie, has disclosed that Nigeria’s crucial energy sector could experience a 35% decline in oil output, as international oil companies delay their investment in the nation’s oilfield due to changes in her economic climate.

Wood Mackenzie, also known as WoodMac, explained that the 35% decline would occur over 10 years and added that the three deep offshore fields would experience a delay as companies would prefer to invest their money in regions with better and clearer terms, than Nigeria.

Nigeria's crude, Crude Oil: Nigeria's volatile oil sector and economic progress, New oil discovery to facilitate massive job creation – NNPC 

The three oil projects, which are Shell’s Bonga Southwest Aparo, Total’s Preowei, and ExxonMobil’s Owowo, are projected to start by 2027, 2025 and 2029, respectively, although, Reuter reported that Total’s Preowei would likely receive a final investment decision by 2020 and 2021, as it is currently under study. The deepwater fields hold an estimated 1.5 billion barrels of oil and could add 300,000 bpd of oil.

“Nigeria is going to enter quite a steep decline in production,” the principal analyst of sub-Saharan Africa upstream for Wood Mackenzie, Lennert Koch, said.

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He added that, “In order to keep its revenue up…it needs to develop additional fields.” In spite of the fact that offshore oil projects are expensive and time-consuming, to maintain output, as fields naturally decline, Nigeria needs continuous investment. Currently, Nigeria has about 780,000 bpd.

Some of the economic factors discouraging the companies include tax reforms, which have resulted in an increase in the cost of operations, part of which is the increase in the VAT rate from 5% to 7.5%.

Another factor is the royalty laws and uncertainty over oil reform. The government plans to pass a bill, which will overhaul the oil sector this year, so companies are unsure if terms of development will change.

[READ MORE: Oil drops below $80, contradicting initial forecasts)

Also, it was reported that under the current economy in Nigeria and with oil under $60 per barrel, the three projects are “not economically viable”. However, at peak production, the three deep offshore fields could generate $2.7 billion a year for the Nigerian government.

On why they are looking at other regions, Koch said, “What makes some of the other regions more attractive is just higher returns (from) lower costs and less regulatory uncertainty.”

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Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Business News

Crude oil prices record gains, as Iraq pledges to curb crude oil production

Oil markets traded softer into the weekend on the back of escalating US-China tensions.

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CRUDE OIL, U.S Shale, Naira under pressure, as crude oil hits $25 per barrel, Oil Price: A dead cat bounce in the making?, Bears tear Crude oil futures into shreds as Brent slumps more than 20%

Crude oil prices soared higher on the first trading session of the week. This is as Iraq, a leading OPEC member, disclosed that it would reduce its oil production. More so, U.S. President Donald Trump has taken executive action on the provision of economic aid to Americans hit by the COVID-19 pandemic, thereby reigniting hopes among crude oil traders for a recovery in energy demand.

The West Texas Intermediate gained 1.26% to $41.71. Brent Crude was also up 0.95% to $44.82 at the time this report was drafted.

Iraq, the second-largest OPEC member (in terms of production capacity) disclosed that it would increase its production cuts to compensate for failing to comply with a deal earlier made in April 2020 to curb crude oil production.

READ MORE: Comparing the 2016 oil price crash to 2020 oil price crash

Insight: In an explanatory note to Nairametrics, Stephen Innes, the Chief Global Market Strategist at AxiCorp, spoke about the macros that crude oil is presently focused on. He said:

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“Oil remains in a relatively tight trading range with upside capped by concerns about the pace of the post-COVID-19 macro recovery and rising OPEC+ and US supply.

“Oil markets traded softer into the weekend on the back of escalating US-China tensions. Although prices bounced favorably on the US employment data, they were unable to hold on to their gains given the geopolitical overhang.”

READ MORE: World’s largest oil company to pay $75 billion annual dividend, despite plunge in profits

Still, crude oil markets continue to test the upper bound of its recent trading range, supported by OPEC’s unwavering compliance commitment which was reaffirmed when Saudi Arabia and Iraq’s energy ministers made a joint statement saying that they were fully committed to the OPEC+ oil production agreement.

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Companies

UACN’s major shareholder sells substantial shares

This is coming a few days after UAC Nigeria Plc announced a deal to divest 51% of its shares in UPDC.

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UACN, UAC Nigeria’s Dividend Payment Might Not Be Worth The Struggle

One of the 3 major shareholders of UAC Nigeria Plc (UACN), Blakeney LLP, has substantially reduced its stakes in the conglomerate with the sale of 80 million additional shares.

This was disclosed in a notification that was sent to the Nigerian Stock Exchange (NSE) by UAC Nigeria Plc. The notification was signed by the Company Secretary/Legal Adviser, Godwin Samuel.

Note that this is coming a few days after UAC Nigeria Plc announced a deal to divest 51% of its shares in UACN Petroleum Development Company (UPDC) to Custodian Investment Plc.

READ MORE: Berger Paints declares dividend of 25k per share, announces 6% increase in revenue

An analysis of this current sales and reduction of its stake shows that Blakeney LLP reduced its shareholding in the conglomerate through a deal on August 5, at a price of N5.75 per share. A further breakdown of the transactions shows that the 80,000,000 units were sold at N5.75 amounting to N460 million in purchase consideration.

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Back Story: It can be recalled that UACN had earlier sent notifications to the NSE announcing sales of 75 million shares by Blakeney between the months of April and June

READ MORE: Covid-19: Guinness Nigeria warns investors its results will be bad

  • In an earlier notification sent to the Nigerian Stock Exchange and other stakeholders in February 2019, UAC of Nigeria Plc announced the emergence of three major shareholders with more than 5% stake in the company. The three major shareholders include Themis Capital Management (8.08%), Stanbic IBTC Nominees Limited (7.27%), Blakeney GP 111 Ltd (7.55%).
  • Nigeria’s oldest conglomerate has gone through some major restructuring in recent times following investments by these core investors and other major shareholders. In September 2019, UACN announced the outright dissolution of its interest and restructuring of UAC Property Development Company (UPDC) with the transfer of its interest directly to the shareholders.
  • Over the years, UACN has transformed from a very large conglomerate with footprints in different sectors of the economy to a leaner organization with interest in Manufacturing, Food & Beverage, Logistics, Agro-allied Industry, Paints and Chemicals.
  • Blakeney Management is one of the oldest and largest institutional investors in Africa and the Middle East. They are based in London and have been managing funds since 1995 for some of the largest institutions in the world.

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Coronavirus

COVID-19 Update in Nigeria

On the 9th of August 2020, 437 new confirmed cases and 3 deaths were recorded in Nigeria.

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increase as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 46,577 confirmed cases.

On the 9th of August 2020, 437 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 2,864 samples across the country.

To date, 46,577 cases have been confirmed, 33,186 cases have been discharged and 945 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 317,496 tests have been carried out as of August 9th, 2020 compared to 314,632 tests a day earlier.

COVID-19 Case Updates- 9th August 2020,

  • Total Number of Cases – 46,577
  • Total Number Discharged – 33,186
  • Total Deaths – 945
  • Total Tests Carried out – 317,496

According to the NCDC, the 437 new cases were reported from 17 states- Lagos (107), FCT (91), Plateau (81), Kaduna (32), Ogun (30), Kwara (24), Ebonyi (19), Ekiti (17), Oyo (8), Borno (6), Edo (6), Kano (4), Nasarawa (3), Osun (3), Taraba (3), Gombe (2) and Bauchi (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 15,875, followed by Abuja (4,467), Oyo (2,868), Edo (2,382), Rivers (1,939), Kano (1,626), Kaduna (1,598), Delta (1,596), Plateau (1,502), Ogun (1,469), Ondo (1,284), Enugu (905), Ebonyi (870), Kwara (857), Katsina (746), Borno (688), Abia (644), Gombe (631),  Osun (628), and Bauchi (577).

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Imo State has recorded 476 cases, Benue (409), Nasarawa (370), Bayelsa (346),  Jigawa (322), Akwa Ibom (235), Niger (226), Adamawa (185), Ekiti (178), Sokoto (154), Anambra (142),  Kebbi (90), Zamfara (77), Taraba (72), Cross River (68), Yobe (67), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

DateConfirmed caseNew casesTotal deathsNew deathsTotal recoveryActive casesCritical cases
August 9, 202046577437945333186124467
August 8, 202046140453942633044121547
August 7, 202045687443936632637121147
August 6, 202045244354930332430118847
August 5, 2020448904579271732165117987
August 4, 2020444333049101431851116727
August 3, 202044129288896820663225707
August 2, 202043841304888520308226457
August 1, 202043537386883420287225677
July 31, 202043151462879119565227077
July 30, 202042689481878519270225417
July 29, 202042208404873519004223317
July 28, 202041804624868818764221727
July 27, 202041180648860218203221177
July 26, 202040532555858217374223007
July 25, 2020399774388561116948221737
July 24, 2020395395918451216559221357
July 23, 2020389486048332016061220547
July 22, 202038344543813815815217167
July 21, 202037801576805415677213197
July 20, 2020372255628011215333210917
July 19, 2020366635567891115105207697
July 18, 202036107653778614938203917
July 17, 202035454600772314633200497
July 16, 202034854595769914292197937
July 15, 202034259643760613999195007
July 14, 2020336164637541013792190707
July 13, 202033153595744413671187387
July 12, 2020325585717401613447183717
July 11, 2020319876647241513103181607
July 10, 2020313235757092012795178197
July 9, 202030748499689512546175137
July 8, 2020302494606841512373171927
July 7, 2020297895036691512108170127
July 6, 202029286575654911828168047
July 5, 2020287115446451111665164017
July 4, 202028167603634611462160717
July 3, 2020275644546281211069158677
July 2, 2020271106266161310801156937
July 1, 2020264847906031310152157297
June 30, 202025694561590179746153587
June 29, 20202513356657389402151587
June 28, 20202486749056579007149957
June 27, 20202407777955848625148947
June 26, 20202329868455458253144917
June 25, 20202261459454977822142437
June 24, 20202202064954297613138657
June 23, 20202137145253387338135007
June 22, 20202091967552577109132857
June 21, 202020242436518126879128477
June 20, 202019808661506196718125847
June 19, 202019147667487126581120797
June 18, 20201848074547566307116987
June 17, 202017735587469145967112997
June 16, 202017148490455315623110707
June 15, 20201665857342445349108857
June 14, 202016085403420135220104457
June 13, 20201568250140785101101747
June 12, 20201518162739912489198917
June 11, 2020145546813875449496737
June 10, 20201387340938217435191407
June 9, 2020134646633654420688937
June 8, 2020128013153617404084007
June 7, 20201248626035412395981737
June 6, 2020122333893429382680657
June 5, 20201184432833310369678157
June 4, 2020115163503238353576467
June 3, 2020111663483151332975227
June 2, 20201081924131415323972667
June 1, 20201057841629912312271579
May 31, 20201016230728714300768687
May 30, 2020985555327312285667267
May 29, 202093023872612269763447
May 28, 202089151822595259260647
May 27, 202087333892545250159787
May 26, 2020834427624916238557107
May 25, 202080682292337231155247
May 24, 202078393132265226353607
May 23, 202075262652210217451317
May 22, 2020726124522110200750337
May 21, 2020701633921111190748987
May 20, 202066772842008184046377
May 19, 202064012261921173444757
May 18, 202061752161919164443407
May 17, 202059593881826159441837
May 16, 202056211761765147239737
May 15, 202054452881713132039544
May 14, 202051621931683118038154
May 13, 202049711841646107037374
May 12, 20204787146158695936704
May 11, 202046412421521090235894
May 10, 202043992481421777834794
May 9, 202041512391271174532784
May 8, 202039123861181067931154
May 7, 20203526381108460128184
May 6, 20203145195104553425071
May 5, 2020295014899548123704
May 4, 2020280224594641722912
May 3, 2020255817088240020702
May 2, 20202388220861735119522
May 1, 20202170238691035117512
April 30, 2020193220459731715562
April 29, 2020172819652730713692
April 28, 2020153219545425512322
April 27, 20201337644102559942
April 26, 20201273914152399942
April 25, 20201182873632229252
April 24, 202010951143312088552
April 23, 20209811083231977532
April 22, 2020873912931976482
April 21, 20207821172631975602
April 20, 2020665382311884662
April 19, 2020627862221704362
April 18, 2020541482021663562
April 17, 2020493511841593172
April 16, 2020442351311522772
April 15, 2020407341211282672
April 14, 202037330111992632
April 13, 202034320100912422
April 12, 20203235100852282
April 11, 202031813103702382
April 10, 20203051770582402
April 9, 20202881471512302
April 8, 20202742260442262
April 7, 20202541661442042
April 6, 2020238650351982
April 5, 20202321851331942
April 4, 2020214540251850
April 3, 20202092542251800
April 2, 20201841020201620
April 1, 2020174352091630
March 31, 202013982091280
March 30, 2020131202181210
March 29, 2020111221031070
March 28, 20208919103850
March 27, 2020705103660
March 26, 20206514102620
March 25, 2020517102480
March 24, 2020444102410
March 23, 20204010112370
March 22, 2020308002280
March 21, 20202210001210
March 20, 2020124001110
March 19, 20208000170
March 18, 20208500170
March 17, 20203100030
March 16, 20202000020
March 15, 20202000020
March 14, 20202000020
March 13, 20202000020
March 12, 20202000020
March 11, 20202000020
March 10, 20202000020
March 9, 20202100020
March 8, 20201000010
March 7, 20201000010
March 6, 20201000010
March 5, 20201000010
March 4, 20201000010
March 3, 20201000010
March 2, 20201000010
March 1, 20201000010
February 29, 20201000010
February 28, 20201100010

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