PriceWaterhouseCoopers (PwC) has predicted that Nigeria and other oil-producing African countries will lose an estimated $1 trillion in oil export revenues over the next 20 years, as a result of likely low prices.
This is contained in its Africa Oil and Gas Review 2020, themed energising a new tomorrow.
The review notes that Covid-19 delivered a value destruction of the oil market in Africa; adding that African countries, of which many are dependent on oil and gas revenues, have had to divert fiscal resources to supporting healthcare and welfare responses to the pandemic, leading to greater economic distress.
Key highlights from the review
- Oil production in Africa saw a slight increase of 0.5% from 2019 amounting to 8.3 mmbbl/d. This accounts for 8.82% of global production.
- In 2020, production saw a decline of 10% relative to the previous year driven by the Covid-19 demand slowdown for exports.
- Oil reserves: Africa’s proven oil reserves have remained static at 125.7 Bbo from the end of 2019 to 2020. 41% of these reserves are located offshore while 59% are onshore.
- Exports remained static at 7.1 mmbbl/d between 2018 and 2019. However, due to Covid-19 in 2020, exports saw a decline of more than 10%.
- Consumption at 4 mmbbl/d remained unchanged from 2018 to 2019. Consumption fell by less than 10% in 2020. Africa’s domestic market consumes around 50% of its total oil production. Africa has very limited refinery capacity and imports circa 48% of its finished product fuel demand.
- Africa’s proven gas reserves have remained at 527 tcf between 2019 and 2020 — 34% of these reserves are situated offshore.
- Gas production saw a slight increase of 0.36% from 2018 to 238 bcm in 2019. However, production declined by 9% in 2020 due to COVID-19.
- Gas consumption slightly increased by 0.4% from 2018 to 150 bcm in 2019 while it declined by more than 10% in 2020 relative to the previous year.
- Africa consumes 63% of its total gas production, predominantly for power generation.
- African gas exporting countries saw a total decline of more than 6% in 2020 from 39.7 mtpa in 2019 to 37.3 mtpa in 2020.
The review indicates that oil demand globally shows a curbed recovery over the next few years following the Covid-19 induced demand slump, with prices predicted to reach a ceiling of around $54 per barrel, compared to a pre-Covid-19 estimate of long-term pricing ranging between $60 and $70 per barrel.
According to the review, “It is estimated that this lower price forecast will cost Africa a potential $1 trillion in export revenues from oil over the next 20 years.”
What they are advising
- In the wake of this development, PwC has advised in the review that the adoption of the energy transition can provide a ‘lifeline’ in light of declining oil demand.
- The review suggested that the energy transition does in fact create significant positive economic impact and opportunities, and Africa can benefit tremendously from the technology foundations and learning curves largely paid for by the developed world.
- By considering the African energy policy environment one can infer as to whether countries are creating a dynamic or static policy environment in relation to capturing the benefits and economic growth that can be leveraged from the energy transition.
The review also pointed that as export revenues and domestic demand change, energy transition readiness will be an important sustainability factor for many countries that have relied on their oil and gas endowments.
What you should know
- Energy transition refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas and coal — to renewable energy sources like wind and solar, as well as lithium-ion batteries.
- The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition.
Senate President lists benefits of PIB as public hearing on the bill opens
Ahmad Lawan has listed the benefits of the PIB presently before the National Assembly for consideration.
The President of the Senate, Ahmad Lawan, has said that the Petroleum Industry Bill (PIB) which is presently before the National Assembly for consideration and passage will ensure that Nigerians benefit optimally from crude oil production and sale of fossil fuel reserves.
According to a statement that was issued by the Special Assistant, Press to the Senate President, Tabiowo Ezrel, this disclosure was made by Lawan, while declaring open a 2-day public hearing on the bill by the National Assembly on Monday, January 25, 2021.
The Senate President pointed out that the National Assembly in its consideration of the piece of legislation would ensure that the bill when passed into law, guarantees improved revenue earnings for the country.
What the Senate President is saying
Lawan in his statement said, ‘’Let me say this, we (National Assembly) will pass this bill not without ensuring that it is a bill that satisfies certain conditions. Nigeria is blessed with these resources, we want Nigeria to benefit optimally from them. In fact, we are in a hurry because we have lost so many years of benefits that we could have had.’’
He, however, noted that the non-passage of the PIB had been a major drag on the industry over the years, significantly limiting its ability to attract both local and foreign capital at a time when many other countries are scrambling to exploit their oil and gas resources.
Going further, Lawan said, ‘’The mere knowledge that the nation’s oil industry is still being governed by laws enacted more than 50 years ago is ludicrous and extremely disappointing.
‘’As legislators, we will strive to deliver a Bill that will enhance the growth of our oil and gas industry, modernize our fiscal system and enhance competitiveness, while creating harmony for all stakeholders. This is a promise we have made and that we shall achieve.’’
‘’Nigeria must have an oil and gas industry that benefits its people. Equally, our oil and gas industry must be competitive. We must create a sustainable investment climate, where business in the sector will flourish,’’ he said.
He also added that the determination by the legislature to pass the Bill is driven by the need to overhaul a system that has refused to operate optimally in line with global standards, resulting in loss of continental competitiveness, transparency, accountability, good governance and economic loss for the petroleum industry and the country.
The Different chapters of the PIB
The Senate President revealed that the PIB comprises of 4 chapters that outline;
- How to create efficient and effective governing institutions with clear and separate roles for the petroleum industry,
- Establish a framework for the creation of a commercially oriented and profit-driven National Petroleum Company,
- Promote transparency, good governance and accountability in the administration of the petroleum resources of Nigeria among others.
Other benefits of the PIB
He also noted that the PIB upon passage and assent into law by the President;
- Would foster sustainable prosperity within host communities, provide direct social and economic benefits from petroleum operations to host communities,
- Create a framework to support the development of host communities among others
- Establish a progressive fiscal framework that encourages investment in the Nigerian Petroleum Industry,
- Balancing rewards with risk and enhancing revenues to the Federal Government of Nigeria,
- Provide a forward-looking fiscal framework that is based on core principles of clarity, dynamism and fiscal rules of general applications,
- Establish a fiscal framework that expands the revenue base of the Federal Government while ensuring a fair return to investors.
Lawan assured that the National Assembly during the public hearing would deal with all issues relating to the oil and gas industry with thoroughness and effectiveness so as to avert colossal losses to the nation’s economy.
Lawan: PIB will ensure Nigerians benefit optimally from resources
***As Senate begins public hearing on bill pic.twitter.com/nSycKWW4lH
— President of the Senate (@SPNigeria) January 25, 2021
Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure
ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil exports as production resumes.
ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil export terminal, as crude exports resume for the first time in almost six weeks after a fire at the terminal halted operations.
This is according to a company spokesman yesterday, who confirmed the company had lifted force majeure on Qua Iboe crude loadings.
Qua Iboe production started to ramp up to normal levels of 200,000 b/d in the past week, according to sources, with the release of both the February and March loading programs.
The VLCC Dalia was also in the process of loading a 1-million-barrel stem at the Qua terminal since January 21, 2021, according to data intelligence firm Kpler. This will be the first export of Qua Iboe since December 15, 2020, after a fire hit the facility and injured two workers.
The company has been under pressure since the closure and prices have taken a hit as a result of the disruption. S&P Global Platts last assessed the grade at a discount to Dated Brent of 50 cents/b, down from a premium against the benchmark in December.
Bonny Light, a mainstay Nigerian crude which typically trades at roughly the same level as Qua Iboe, was last assessed 30 cents/b higher.
What they are saying
One trader said: “If you get a cargo of Qua now it could be 50 cents to a dollar below Bonny even – a January cargo is completely out of cycle and the reliability issues mean people won’t touch it.”
Another trader stated that: “[The return of Qua Iboe] is not what West African crude assessments (WAF) differentials needed.”
What you should know
- Qua Iboe is one of Nigeria’s largest export grades, and is very popular among global refiners, with India, the US, Canada, Italy, Spain, Indonesia, and the Netherlands being key buyers.
- Qua Iboe is light sweet crude, which has a gravity of 36 API and sulfur content of 0.13%. The crude, produced from fields 20-40 miles off the coast of southeast Nigeria, is brought to shore at the Qua Iboe terminal via a seabed pipeline system.
- Indian demand has steadied following a buying spree late last year, and European demand has been hit by renewed coronavirus lockdowns in the region.
- Prices for Nigerian crude have suffered in recent weeks, even with lower supply due to the outage.
- February and March loading programs have been issued for Qua Iboe averaging 169,643 b/d and 153,226 b/d respectively.
- Production of this key grade ranged between 180,000-220,000 b/d in 2020, according to S&P Global Platts estimates.
Malabu Oil Scandal: Prosecutors demand JPMorgan documents
U.S bank, JPMorgan has been ordered by a court to present documents of a transaction regarding the $1.3 billion Malabu oil field sale.
Prosecutors at the Milan Court holding a trial for the $1.3 billion Malabu oil field sale have demanded that U.S bank JPMorgan present documents of a transaction as part of the corruption case regarding the sale of the oilfield.
This was revealed in a report by Reuters, as the court case over the sale of the oil field continues. Prosecutors claim that nearly $1.1 billion was stolen by Nigerian politicians and middlemen, with former oil minister, Dan Etete, keeping half.
Prosecutors demanded that the Milan court accept emails sent by UK authorities, coming from a separate case launched by the Nigerian government against the bank for its role in the controversial deal.
The emails include a transaction between Nigerian Attorney General Mohammed Adoke Bello and JPMorgan using the address of a company owned by another Nigerian named Aliyu Abubakar. Prosecutors allege that he paid $500 million in cash as part of a bribe.
Both men have also been charged for corruption relating to the deal, with both pleading not guilty.
The second email includes two JPMorgan executives expressing views on whether to transfer $1.1 billion to accounts related to Nigerian banks. The Milan prosecutors said the emails were valid, stating that a Swiss and Lebanese bank had also expressed doubts over the transaction.
The Milan court said it would make a decision over the emails on the 3rd of February. The verdict of the court case is expected to be announced in March 2020.
What you should know
- Nairametrics reported that Dan Etete, former Nigerian Minister of Petroleum, said that the $1.3 billion sales of Malabu oil field to Shell and Eni in 2021 was legally perfect, with zero traces of corruption in the deal.
- Royal Dutch Shell announced that it would write down its investment in the controversial Malabu OPL 245 offshore field in Nigeria.
- Malcolm Brinded, an ex-Upstream Chief of Shell Petroleum, told international prosecutors that the sum of $1.3 billion paid by Shell and Eni in 2011 to acquire OPL 245 offshore field was lawful, and he had no reason to think it was illegal.
- A lawsuit filed by the Nigerian government against US bank JPMorgan Chase, claiming over $1.7 billion for its role in a disputed 2011 Malabu oil deal, will proceed to trial. The six-week trial in London is expected to commence on the first available date after November 1 2021, meaning that proceedings may not begin until 2022.