NNPC begins rehabilitation of Port Harcourt refinery

The Nigerian National Petroleum Corporation on Thursday announced the formal commencement of the first phase of the rehabilitation of the 210,000 barrels per day capacity Port Harcourt refinery.

Port Harcourt refinery complex also houses the 60,000 barrels per day old refinery that was built in 1965 and the 150,000 barrels per day new refinery, inaugurated in 1989.

The Group Managing Director, NNPC, Maikanti Baru, flagged-off the formal commencement of the rehabilitation work on the facility at the premises of the refinery in Port Harcourt on Thursday, 19 years after the last Turn Around Maintenance exercise of the nation’s premier refining plant.

NNPC Group General Manager, Group Public Affairs Division, Ndu Ughamadu, in a statement issued in Abuja, said the project would be executed by Milan-based Maire Tecnimont S.p.A, in collaboration with its Nigerian affiliate, Tecnimont Nigeria.

NNPC said Maire Tecnimont S.p.A is listed on Milan Stock Exchange with interest in international engineering and construction, technology and licensing, and energy business development.

According to the statement, the Tecnimont Group has operations in 40 countries, numbering about 50 operative companies with a workforce of about 5,500 employees.

Baru stated that at the end of Phase One, the refinery complex should be able to reach 60 per cent capacity utilisation.

NNPC said it was engaging Eni/NAOC as Technical Advisor to support the rehabilitation of Port Harcourt Refining Company and that NNPC/PHRC would leverage Eni’s extensive refinery supply chain network and warehouses to procure critical materials for the programme.

The corporation’s spokesperson noted that the first phase of the rehabilitation contract,  which would run for six months, would involve detailed integrity check and equipment inspection of the Port Harcourt refinery complex beginning from the end of March 2019.

According to Ughamadu, the integrity test will come as a forerunner to the second phase of the rehabilitation project which entails a comprehensive revamp of the complex aimed at restoring the refinery to a minimum of 90 per cent capacity utilisation.

He noted that subject to the successful completion of the integrity checks, Phase Two of the project would be executed on an Engineering Procurement Construction basis by Tecnimont in collaboration with the original builders of the plant, JGC of Japan.

Speaking on behalf of the contractors, Antonio Vella, Chief Officer, Upstream, Eni, said all the companies involved would deploy all available modern resources to ensure effective upgrade of the plant.

Vella stated that with the commitment of all parties involved, it was certain that NNPC would be able to celebrate the revamp of the PHRC that would lead to its full capacity utilisation on schedule and in full safety.

Speaking on behalf of the workers’ unions, the Branch Chairman of the Petroleum and Natural Gas Senior Staff Association, Odor Ayiri, and Chairman of the National Union of Petroleum and Natural Gas Workers, Dibiah Joseph, jointly pledged the support of workers to ensuring a smooth turnaround of the facility.

Recall that NNPC had to abandon its earlier funding strategy by its DSDP Term Contractors/Consortia due to onerous conditions demanded after more than 12 months of negotiations.

NNPC resorted to immediate direct funding from internal cash flows while it approached the financial markets for debt financing.

NNPC further segmented the rehabilitation to begin with Port Harcourt refinery complex and then progress to Warri and Kaduna refinery complexes using the same methodology.

Four-million-barrel crude oil target ‘not feasible’

OilNigeria’s aspiration to increase its daily crude production from 2.2 million barrels per day to four million barrels daily by 2025 is in doubt as the production from Joint Ventures (JVs) shrinks further, the Country’s President of Association of International Energy Economists (AIEE), Prof Wunmi Iledare, has said.

Production from the deepwater through which the country derives substantial part of its daily crude output, he also stated, is not increasing either.

In a telephone interview with The Nation, Iledare said the fact that production from the Joint Ventures and the deep water operation is falling gradually is an indication that the country would find it difficult to improve its output significantly in future.

According to him, the four million production target by Nigeria is not realistic in view of the fact the country is presently struggling to produce barely 2.2 million barrels per day.

He said the downward trend, which production from Joint Venture partners, including Mobil and Shell is witnessing in recent times, coupled with that of deepwater production, is not putting Nigeria in a comfortable zone to increase its output significantly in the next few years.

He said inability by the Federal Government to sign a new Production Sharing Contract (PSC) is going to affect crude production in the country.

Iledare said: “There is no Production Sharing Contract (PSC) in recent times. Also the lead time from contract to production takes between 10 years to 15 years, implying that the country must wait for that period, whenever the government is ready for such contract.”

The former University of Port Harcourt lecturer, said the country is lacking investment in infrastructure, adding that the development has made it difficult for Nigeria to produce either three million or four million barrels of crude per day.

“Honestly, producing three million bpd or four million bpd is not possible. JV production is declining; no meaningful investment to build capacity; no access to new investment. Also, there is market glut in targeted destinations to Nigeria oil, coupled with the fact that the reform in the sector is elusive,” he added.

Iledare said Nigeria has enough reserves to sustain either three million or four million daily crude production, but does not have the required infrastructure or market to sustain it.

He urged stakeholders, including the Federal Government, to come together to build infrastructure for the sector, adding that any attempt by the operators to put in place robust infrastructural mechanism would make the industry compete well globally.

The Nigerian National Petroleum Corporation (NNPC) in conjunction with some multinational oil firms signed a Joint Venture agreement. The development ensures that the Joint Partners, including Shell and Mobil, contribute 45 per cent to Nigeria’s crude output while NNPC contributes 55 per cent.

In addition, Shell has almost exited Nigerian market, a development, which would have significant effect on the contributions of the oil firm to Nigeria’s output.

Content Board identifies $25b investment openings in oil industry

oilThe Nigerian Content Development and Monitoring Board (NCDMB) has identified investment opportunities worth $25 billion in the oil and gas industry that would be tapped in the next two years.

Its Executive Secretary, Simbi Wabote, who stated this while enumerating the benefits of the Nigerian Oil and Gas Opportunity Fair (NOGOF), which holds in Yenagoa, the Bayelsa State capital in April 4 and 5.

The event has as its theme:  “Maximising investments in the Nigeria’s oil and gas industry for the benefit of the Nigerian people”.

He said the first edition, which held two years ago, was able to attract investment worth $20 billion. This year’s edition, he said, is expected to attract $25 billion worth of investments.

He said: “In the past two years we have been able to push opportunities worth about $20 billion into the oil and gas industry, citing projects such as the Shell Petroleum Development Company Limited’s (SPDC) Bonga Southwest project, Total’s Ikike project, ExxonMobil Ibot project and Agip Abo project, among others. ‘’

Final Investment Decisions (FIDs), he said,  would be taken on these projects soon while the FID on Abo project has been taken and work has commenced on it. ” These projects were some of the investments opportunities identified and discussed with industry players at the first edition of NOGOF,” he said.

He added:“In the next two years we are also looking at pushing opportunities worth $25billion going by the opportunities we have identified and ready to share at the oncoming fair.”

He noted that the implementation of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, has brought tremendous transformation in the sector, adding that the country’s oil and gas industry looks positive in spite of the changing dynamics in the global market. The dynamics have led to crude oil pricing uncertainties and the Petroleum Industry Governance Bill (PIGB) hanging in the National Assembly.

Since the Nigerian Content Act came into effect, he said, the oil and gas industry had recorded significant FDI from pipe mills and growth in Nigerian-owned marine vessels.

Wabote said the major focus of the Nigerian Content Law was “domiciliation” of value-adding activities. According to him, NOGOF would be a forum to share information about available opportunities to investors, who had established fabrication yards, engineering houses, pipe mills, pipe-coating yards, cable manufacturing and other facilities since the implementation of the Nigerian Content Act in 2010.

“It is important for the investors and other stakeholders to have a line of sight to projects opportunities in the funnel so they can position themselves for the desired growth,” he said, adding that investments and service providers were stifled in the past due to lack of information on projects in the short, medium and long term.

“In the past, by the time the opportunities come on the table the service providers will not be ready in terms of capacities to deliver the goods, hence the importance of this Fair.

‘’The NOGOF is a platform we want to use to share the opportunities that are warehoused by the various international operating companies and indigenous operators. This would cover upstream, midstream and downstream business opportunities. It will address access to market, so that companies will know and understand what is coming and prepare themselves.

“NOGOF brings together major players as well service companies, industry regulators and government agencies to showcase opportunities in the industry and present available in-country capacities to all stakeholders in attendance. A copy of the compendium of Nigerian Content Opportunities in oil and gas industry will be given to every delegate to the Fair.

“The maiden  edition, which  held in Uyo, Akwa Ibom State, last two years had over 1200 delegates, 33 exhibitors and presentation of industry opportunities, covering engineering designs, pipe construction facilities upgrade, projects in various parts of the industry, among others. The delegated extensively discussed brown and green fields’ opportunities, among others.”

The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu will lead discussions on the available and emerging investment opportunities in the Nigerian oil and gas Industry at this year’s NOGOF.

Nigerian National Petroleum Corporation (NNPC) Group Managing Director, Dr. Maikanti Baru and chief executives of international operating companies are  expected at the event.

Oil reaches $68 on falling supplies

Oil prices rallied yesterday after data showed falling stockpiles of crude as refined fuels also plunged last week.

International Brent crude oil futures were up 74 cents, or 1.2 per cent, at $68.35 a barrel hitting a new high going back to Nov. 13.

U.S. West Texas Intermediate crude futures rose $1, or 1.7 per cent, to $60.03 per barrel, after its highest level since Nov. 12. The more heavily traded WTI contract for May delivery also rose above $60 a barrel yesterday.

WTI has rallied 32 per cent this year after losing nearly half of its value in the final months of 2018. Brent is also up more than 27 per cent year to date, boosted by production cuts from the Organisation of Petroleum Exporting Countries (OPEC) and United States (U.S.) sanctions against Iran and Venezuela.

Nigeria’s state-run oil firm, the Nigerian National Petroleum Corporation (NNPC) assured that it will achieve the 2.3million barrel per day production (mb/d) volume-target for the 2019 budget. It said measures have been put in place to attain the feat.

In a presentation to the Senate Committee on Finance on the 2019  – 2021 Medium Term Expenditure Framework (MTEF),  its Group Managing Director,  Dr. Maikanti Baru, said with improved security in oil bearing communities as a result of sustainable community partnership, the industry was confident of attaining the production target.

Represented by the firm’s Group General Manager, Corporate Planning and Strategy,  Mr. Bala Wunti, the GMD said though the country had production capacity of over 2.5mb/d, the unfortunate security situations of the past in areas of operation made it difficult to achieve desired production targets.

Baru said: “The current administration under President Muhammadu Buhari is strongly focused on engagement and sustainable community partnership which has resulted in improved security and production. This will further improve and we are thus confident of achieving the 2019 budget production target.”

On the possible impact of OPEC quota on production target, Baru said the production target of 2.3mb/d was a combination of liquid hydrocarbon production comprising crude oil and condensate, noting that the OPEC quota only covers crude oil production.

He said with the country’s condensate production currently oscillating between 400,000 to 600,000 bpd, the country was in a good position to attain the overall production benchmark. He said  the firm was working assiduously with other relevant agencies to ensure the attainment of the 2019 budget assumptions contained in the 2019 – 2021 Medium Term Expenditure Framework (MTEF).

Dr. Baru also said Nigeria’s  oil grade traded higher than Dated Brent, attributing the development to the recent reforms in the crude oil management regime with emphasis on entrenching pricing transparency and performance.

He restated NNPC’s commitment to transparency and efficiency in every aspect of its operations, stressing that under his watch, the corporation had recorded considerable gains in all the thematic indicators.

US sanctions, OPEC deal to push oil prices higher — Analysts

Supply cuts by the Organisation of Petroleum Exporting Countries and United States’ sanctions against Iran and Venezuela will push the oil market into undersupply and boost the cost of crude in coming months, Morgan Stanley forecasts.

The investment bank previously said oil prices were more likely to fall after Brent crude topped $65 a barrel last month. But Morgan Stanley now sees the international benchmark for oil prices rising to $75 by the third quarter, according to CNBC.

Analysts at Morgan Stanley say they changed their minds after last week’s CERAWeek by IHS Markit energy conference in Houston. They are now more convinced that OPEC has the determination and capability to drain oversupply from the oil market.

“Conversations with several OPEC officials left us with the impression that Brent in the mid-$60s is not where the cartel would like to see it,” Morgan Stanley global oil strategists, Martijn Rats and Amy Sergeant, said in a research note Tuesday.

“We assume that OPEC will extend – or even deepen – production cuts to support the oil market at the next meeting in June.”

OPEC and its partners aim to keep 1.2 million barrels per day off the market. On Monday, the alliance cancelled an April meeting intended to review the supply deal, leaving the output cuts in place until the June gathering. Members of the pact believe the market will remain oversupplied through the first half of the year, making the April meeting unnecessary.

Refineries lost N132bn in 2018, says NNPC

The operating deficit recorded by the nation’s refineries rose by 39 per cent to N132.5bn in 2018, compared to the previous year, data from the Nigerian National Petroleum Corporation showed on Tuesday.

The refineries posted a loss of N95.09bn in 2017, according to the NNPC data.

The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day but have continued to operate far below the installed capacity for many years.

Port Harcourt refinery, which did not process any crude oil in seven months, recorded the biggest loss of N59.96bn in 2018.

Kaduna refinery, which was idle for 11 months, lost N31bn while Warri refinery recorded a deficit of N41.71bn, according to the NNPC.

A total of N13.58bn was lost in January; N8.05bn in February; N11.88bn in March; N20.08bn in May; N14.51bn in June; N10.45bn in July; N10.79bn in August; N6.97bn in September, N9.32bn in October, N9.58bn in November and N17.31bn in December.

The refineries made a profit of N6.32bn in April for the first time in 10 months.

It was observed that Warri refinery was idle in January, September and October 2018.

The NNPC, in its monthly report released on Tuesday, said its group operating revenue for December stood at N731.88bn, N439.59bn higher than the previous month performance, while expenditure surged by N429.52bn.

It said, “This month’s revenue is far more than the budgeted revenue which resulted in a marked increase in trading surplus despite the drag in operating expenditure in the month.”

The corporation recorded a trading surplus of N12.13bn in December.

“This increased performance is attributable to NPDC’s higher revenue recorded during the period following NPDC continuous revenue drive, arising from recent average weekly production of 332,000bpd making the target of 500,000bpd for 2020 achievable. This also captured the updated previous months’ revenue and expense,” it said.

In January, the Petroleum and Natural Gas Senior Staff Association of Nigeria expressed its opposition to the current operating model for the nation’s refineries.

PENGASSAN described the model as unsustainable, calling for the adoption of the Nigeria LNG Limited’s business model “after the refineries must have been rehabilitated for them to yield better dividends to the nation’s economy.”

It also called on the government to increase local refining capacity and remove all observed encumbrances to full rehabilitation of all the four refineries.

Oil rises as OPEC holds off cuts decision

Oil prices were slightly up early yesterday as the market was assessing the news that a panel of the OPEC allies is recommending that partners cancel a scheduled extraordinary meeting in mid-April, leaving the decision for the cuts extension for a meeting at the end of June instead.

WTI Crude rose 0.07 per cent at $58.56, while Brent Crude was traded up 0.24 at $67.32, with both benchmarks recovering from losses earlier in the day.

“In consideration that market fundamentals are unlikely to materially change in the next two months, the JMMC adopted a recommendation to forego the full Ministerial Meeting in April and instead schedule a JMMC meeting in May ahead of the OPEC Conference meeting on 25 June, during which a decision will be taken on the production target for the second half of 2019,” the Joint Ministerial Monitoring Committee (JMMC) said at the end of a meeting in Baku, Azerbaijan.

Oil slips on economic slowdown

Brent crude oil futures LCOc1 were at 67.03 dollars per barrel at 0231 GMT, down 13 cents, or 0.2 per cent, from their last close, but not far off the 68.14 dollars per barrel 2019-high reached last week.

U.S. West Texas Intermediate (WTI) futures CLc1 were at 58.32 dollars per barrel, down 20 cents, or 0.3 per cent, from their last settlement, and also not far off their 2019-high of 58.95 dollars from the previous week.

“The greatest downside risk to our oil price view is demand weakness on slower economic growth.

“Our base case is that global oil demand will increase by 1.3 million barrels per day (bpd) in 2019. A synchronized global slowdown in growth could push global demand growth to below 1 million bpd,” Bernstein Energy said on Monday.

U.S. manufacturing output fell for a second straight month in February, in a sign that the world’s biggest economy has been slowing down in the first quarter.

In Asia, Japan’s exports fell for a third straight month in February in a sign of growing strain from slowing global demand.

In spite this, oil prices have gained around a quarter since the start of the year amid U.S. sanctions against Iran and Venezuela, and as the Organisation of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia – known as OPEC+ – have pledged to withhold 1.2 million bpd in supply to prop up prices.

OPEC’s de-facto leader,  Saudi Arabia said on Sunday that balancing oil markets was far from done as inventories were still high.

Russia also said production cuts would stay in place at least until June.

As a result, Bernstein forecast an inventory draw of 37 million barrels in the first quarter for the 36 member countries of the Organisation for Economic Co-operation and Development (OECD), which comprises most industrialized nations.

The International Energy Agency (IEA) said on Friday it expected oil markets to be in a modest deficit from the second quarter.

Key for the supply and demand balance will be the United States, where crude production has soared by around 2 million bpd over the past year, thanks largely to an onshore boom in shale formation drilling.

The number of rigs drilling for new oil production in the United States has been falling in ongoing year, and hit its lowest level since April 2018 last week, at 833 operating rigs.

However, U.S. crude oil production C-OUT-T-EIA still increased at the start of 2019, hitting a record 12.1 million barrels per day (bpd) in February, data from the Energy Information Administration (EIA) showed.

Output has since dipped back to 12 million bpd, but that still makes America the world’s biggest crude oil producer.

Oil hits $65 on OPEC cuts, Saudi shutdown

Brent crude oil prices hit 2019 highs above $65 per barrel on Friday, spurred by OPEC-led supply cuts and a partial shutdown of Saudi Arabia’s biggest offshore oil field.

Brent rose as far as $65.10, pushing past the $65 mark for the first time this year, before falling back to $64.77 by 0623 GMT. That was still 0.3 percent above the last close. The international benchmark for oil prices is at a near three-month high and set for a 4.5-percent gain for the week. U.S. West Texas Intermediate (WTI) crude futures were at $54.56 per barrel, up 15 cents, or 0.3 per cent, from their last settlement.

Traders said prices were pushed up by the partial closure of Saudi Arabia’s Safaniyah, its biggest offshore oil field with a production capacity of more than 1 million barrels per day (bpd).The shutdown occurred earlier this week, a source said, and it was not immediately clear when the field would return to full capacity. The partial closure comes on top of voluntary supply cuts led by the Organisation of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia the de-facto leader, aimed at tightening the market. The group as well as some non-OPEC producers including Russia late last year agreed to cut crude output by a joint 1.2 million bpd. Top exporter Saudi Arabia said it would cut even more in March than the deal called for. Russia has reduced its oil production by 80,000-90,000 bpd from its level in October, Moscow’s reference level for its cuts, the country’s energy minister said.

“Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply,” Bank of America Merrill Lynch said in a note. It also expects “a 2.5 million barrels per day drop in OPEC supply from 4Q18 into 4Q19”. Despite Friday’s bullish market, there are signs of a slowdown in demand. “Maintenance season finally materialised this week, with (U.S.) refinery utilisation decreasing by a sharp 480 basis points week-on-week to 85.9 percent,” U.S. investment bank Jefferies said on Friday. Faltering economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the United States. “Our macroeconomic view remains firmly bearish,” said commodities brokerage Marex Spectron. Surging U.S. output may also undermine OPEC’s efforts to tighten the market.

Retail sales post biggest drop in nine years in December U.S. crude production rose by more than 2 million bpd last year, to 11.9 million bpd, making the United States the world’s biggest oil producer.

Most analysts expect U.S. output to rise past 12 million bpd soon, and perhaps even hit 13 million bpd by the end of the year. Climbing U.S. shale oil supply, increasing spare capacity within OPEC and stagnating fuel consumption meant the medium-term oil price outlook was lower, BoAML said. “We see growing downside risks to medium-term oil prices on rising U.S. supply and slower consumption,” the U.S. bank said. It expected Brent to range between $50 and $70 per barrel in the coming five years.

NNPC, Shell, others sign FID for gas project

The Nigerian National Petroleum Corporation and its joint venture partners on Wednesday in Abuja signed the Final Investment Decision on the development of the 4.3 trillion cubic feet Assa North/Ohaji South Fields in Oil Mining Lease 21.

Joint venture partners of the NNPC in this project include Shell Petroleum Development Company, Total Exploration and Production Nigeria and Nigeria Agip Oil Company.

The NNPC Group General Manager, Group Public Affairs Division, Ndu Ughamadu, said the project, when fully developed, would add about 600 million standard cubic feet of gas per day to the national gas grid with the capacity to expand to 1.2 billion cubic feet per day, while another 197 million stock barrel of condensate would also be realised.

The Group Managing Director, NNPC, Maikanti Baru, described the ANOH project as a critical gas supply hub in Nigeria’s burgeoning gas-infrastructure network designed to provide the linkage between the eastern, western and northern gas pipeline systems.

Baru, who was represented at the FID execution event by the NNPC Chief Operating Officer, Upstream, Bello Rabiu, said the successful completion of the multi-faceted project, which was an integral part of the seven critical gas development projects, would be dependent on a number of critical success factors and enablers that include synergy and teamwork between the NNPC and all the key stakeholders.

The NNPC boss thanked stakeholders for signing the FID on the ANOH Project after being on the drawing board for 14 years.

He said the corporation and its JV partners had worked on all the issues and had developed a sustainable strategy to develop the considerable gas resources in Assa North-Ohaji South Fields.

“Finally, I will like to conclude with immense compliments to the NNPC, SPDC, TEPN and NAOC project teams and other critical stakeholders as we enter into the next major phases of engineering, procurement and construction of this project,” Baru said.

He said the corporation would continue to leverage available expertise and capital from its global outreach to accelerate and deliver on first gas from the project between the last quarter of 2019 and the first quarter of 2020.

To this end, he noted that the NNPC had engaged two project management consultants (DeltaAfrik/Worley Parson and Crestech/Penspen) who would work with NNPC JV partners and other stakeholders to achieve set project deliverables, as NNPC’s project management teams were expected to strengthen oversight functions by ensuring prompt decision making and timely approvals.

The Managing Director,  SPDC and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, said Shell was committed to the successful implementation of the project.

He commended the resilience, diligence and enthusiasm of the project team and emphasised that the ANOH project would offer immeasurable opportunities for Nigerian firms to benefit from engineering, procurement and construction contracts.

Okunbor also announced the inauguration of boards to administer the Global Memorandum of Understanding for the two clusters of the project to the tune of N1bn for development projects within the host communities for the next five years.

The Managing Directors of TEPN and NAOC, Nicholas Terraz and Lorenzo Fiorillo, respectively, aligned their companies with the NNPC’s aspiration of ensuring timely completion of the project.