Effect of current crude oil price plunge on Nigeria Oil Industry

The steep drop in crude oil prices have put most Nigerian oil companies at risk, with industry experts saying oilfield shutdowns and job losses are imminent.

The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, last month, put the cost of crude oil production in the country within the range of $15 to $17 per barrel.

The global oil benchmark, Brent crude, fell on Wednesday to as low as $15.98 per barrel, its lowest since June 1999, before rising to $20.87 per barrel as of 6.45pm Nigerian time.

“There is so much oil floating around in tankers that people can pick and choose, and ask for all sorts of discounts. This has serious repercussions for a country like Nigeria. Unfortunately for us, we are in a very nasty situation,” an energy expert and former board member of the NNPC, Alhaji Abdullahi Bukar, said.

Bukar also said some companies might shut the more expensive fields and leave the ones producing at “reasonably low-operating costs” to continue production.

The Chief Executive Officer of International Energy Services Limited, Dr Diran Fawibe, said the security cost and other charges imposed on operators had made the production cost in the country very high.

“So, in order to sustain that production level, the price must be high enough. We may see quite a number of projects being suspended, if not outright cancelled, until the price has gone up to a level where they can justify the economies,” he said.

2020 Nigeria Crude Oil Benchmark

Nigeria has not stopped producing crude oil but a persistent crash in oil prices may lead to a halt in production, the Nigerian National Petroleum Corporation has declared.

Nigeria recently slashed the oil price benchmark for its budget to $30 per barrel from $57 per barrel, but oil prices kept crashing since the outbreak of coronavirus as demand plunged.

On whether Nigeria had stopped oil production due to the persistent price crash, the country’s national oil firm said it had not.

Earlier this month, the Group Managing Director, NNPC, Mele Kyari, said Nigerian crude oil grades were not rejected, although stranded in the market.

Crude oil facts

Crude oil can be 'heavy' or 'light' & 'sweet' or 'sour.'  Sweet/sour refers to sulfur.  Sour crudes are full of sulfur which has to be removed from the oil. 

A refinery is designed around a specific type of crude and can't refine any crude oil.

Especially true about oil from the Bakken; very light.  Because pipelines have become such a political football, Bakken oil is often shipped by rail, where any subsequent derailment can then be catastrophic. The same people protesting against pipelines then rail againt railroadsAs you say; crude oil can be 'heavy' or 'light' & 'sweet' or 'sour.'  Sweet/sour refers to sulfur.  Sour crudes are full of sulfur which has to be removed from the oil. 

Other famously light (and sweet!) crudes - Libya and Nigeria.  Chart from the EIA and is a few years old .  

US Crude Imports

For the week ending April 17, the United States imported 4.9 million b/d of crude oil - that's on par with U.S. crude oil imports back in 1987..

Nigerian Navy Arrests 50 Pipeline Vandals, Recovers 6,000 Gallons of Stolen Crude

Chiemelie Ezeobi

The Western Naval Command (WNC) of the Nigerian Navy (NN) has arrested no fewer than 50 suspected pipeline vandals in an ongoing major operation at Majidun, Ikorodu area of Lagos State.

This is in addition to their recovery of about 6,000 gallons of stolen products siphoned from several vandalised Nigerian National Petroleum Corporation (NNPC) pipelines.

The naval taskforce had discovered the stolen  products stored in 25 and 50 litre kegs, which were covered with leaves and hidden in the belly of  the swamp as well as in some houses of the residents living in the area.

The products, suspected to be Premium Motor Spirit (PMS), also called petrol, which were carted away to the jetty of the WNC, Apapa, in 10 long trucks were estimated to be worth over N30million.

Code-named Operation Awatse, an Hausa word for 'scatter', the ongoing operation saw military personnel drawn from the NN and the Nigerian Army (NA), storm the riverine community in a bid to sanitise it and arrest the prolonged economic sabotage that had been going on around the community.

Addressing newsmen afterwards, the Flag Officer Commanding, Western Naval Command, Rear Admiral Samuel Alade said the suspects were in custody but would not be paraded so as not to jeopardise investigations.

He said the ongoing raid was in tandem with the determination of the Chief of Naval Staff (CNS), Vice Admiral Usman Jibrin's zero  to halt illegal bunkering and pipeline vandalism.

He said, "The operation was planned sequel to directives by the CNS last week. It has yielded successes so far and many arrests have been made.

"Also, products and wooden boats popularly called Cotonou boats were intercepted and destroyed by our personnel.

“The products would be handed over to the PPMC and the arrested suspects would also be handed over to concerned authorities that would prosecute them.

"At the end of the operation, the Nigerian Navy may consider establishing a Naval base so that we can sustain the gains recorded.

"I want to warn the perpetrators to seek legitimate employment instead of living on illegalities. I must emphasise that the CNS has zero tolerance to any form of illegalities within the maritime space.

"I would want to appeal to the general public to provide useful information that would help us sustain this fight. We really need cooperation from members of the public. There is need for residents around Majidun, Arepo and Ogolonto to provide us with information."

On the allegation that some of the oil thieves have the support of some traditional rulers in the area and some officials of the NNPC, Alade said they were not aware of that, adding that ongoing intelligence gathering would reveal the brains behind the ignoble act.

The petroleum products were afterwards handed over to the NNPC Area manager in charge of Mosinmi Depot, Mr. Remi Eluyefa by the commander of operation, Commodore Tekumo Okoli, who also doubles as the Commander, Nigerian Navy Ship (NNS) Beecroft.

Eluyefa while fielding questions from journalists, commended the navy for the major breakthrough it recorded in helping them tackle the huge economic sabotage and loss of products.

He said, "We are not security personnel so we have  always depended on security agencies to provide security on their pipelines. The security of the pipelines is not the work of NNPC.

"We depend on security agencies to provide us with security because most of us are engineers who do not know much about security. We are glad that the navy has delivered", he said.
persons of voting

Shell’s Forcados Terminal Achieves 14-year Safety Milestone

Ejiofor Alike
The Forcados Terminal in the western Niger Delta operated without a significant safety incident between September 2000 and September 2014, during which some 1.25 billion barrels of oil passed through the facility that is operated by the Shell Petroleum Development Company (SPDC) operated Joint Venture.

Shell’s Corporate Media Relations Manager, Mr. Precious Okolobo said in a statement at the weekend thatthe safety milestone translates into a daily average of 300 staff handling nearly two export tankers every week.

The Managing Director of SPDC and Country Chair, Shell companies in Nigeria, Mr. Mutiu Sunmonu confirmed that the feat was a significant achievement in a work environment that involves multi-disciplinary staff teams and contractors.

“Over the years, SPDC has improved work processes and trained staff leading to the introduction of the Goal Zero initiative on safety. We’re happy that the improvements continue to manifest not only at Forcados Terminal but also in other installations,” Sunmonu added.

Over the past 365 days, a number of high risk maintenance and engineering activities have also taken place at the Forcados Terminal, including rehabilitation of crude oil storage tanks, subsea repairs to the tanker loading system and upgrade to the jetty amongst others.

Okolobo said the asset did not record any disruptions relating to these multiple concurrent activities, which is also evidence of the sustained and proactive engagement of the host communities.

The Forcados Terminal was inaugurated in 1971, and was upgraded between 1994 and 1998. The terminal receives, treats, stores and exports crude oil produced by SPDC and other operators in the western Niger Delta, and has an installed storage capacity of 6.3 million barrels of product.

RenCap Sees Growth Potential in African Oil Stocks

African Oil Stocks

GoddyEgene

Analysts at Renaissance Capital (RenCap) have rated   African oil exploration and production (E&P) high, saying there are upside potentials in most of the companies that should necessitate investment considerations. The E& P companies covered by RenCap span 27 with a combined market capitalisation of $30 billion.

In the report titled, “African Oil and Gas, Think Local, Be Selective,” RenCap said  African E&Ps have tended to show more robust economics than their peers, breaking even at a $40 per barrel oil  price, while North American shale E& Ps require a $60-70  per barrel  price.

According to RenCap, they initiated coverage of eight stocks which include: Afren, African Oil, Caverton Offshore Support Group Plc, Eland Oil & Gas, Lekiol, Mart Resources, Oando Energy Resources, Savannah Petroleum and Seplat Petroleum and Development Plc.

Out of the eight, RenCap said its top  three picks from the pack are, Seplat,  Lekoil and Africa Oil,  adding  that  their target prices for the stocks  imply 50-100 per cent  upside potential.

“We see the greatest upside for Seplat coming from possible merger and acquisition (M&A) transactions, and believe it is strongly positioned to capture upcoming non-organic growth opportunities thanks to its indigenous status. Our investment case for Lekoil is based on an attractive and undervalued asset base offering both high cash returns and material exploration upside; strong delivery by management since its Initial Public offering and its indigenous status,” the firm said.

Speaking on   Africa Oil, RenCap said with its world-class discoveries and exploration portfolio, African Oil is one of the three top picks.

“Following a 50 per cent decline in the company’s share price since the end of last year, we now see the current share price as reflecting only the value of the Lokichar basin, implying zero value being attributed to its Ethiopian discovery and all other exploration prospects,” RenCap said.

On Lekoil, RenCap explained that they expect Lekoil to post one the highest returns in the medium term.

“Our positive investment stance on Lekoil is based on the combination of an attractive and undervalued asset base offering both high cash returns and material exploration upside; strong delivery by management since IPO; and indigenous status, which should allow the company to receive additional tax breaks and increases its chances for future asset acquisitions,” the firm said.

Giving more information on selection of Seplat among the top picks, RenCap said they see the biggest upside risk to its valuation from possible M&A transactions, believing Seplat is strongly positioned to capture upcoming non-organic growth opportunities and could possibly complete one or two deals in the next 12 months.