Market Report: Nigeria to End Gas Flaring by 2025
The Minister of State for Petroleum Resources H.E. Timipre Sylva said Nigeria is committed to ending gas flaring by 2025. The minister said the country is committed to achieving global consensus by eliminating gas flaring, noting that gas flaring has already significantly reduced by putting in place programs that allow the utilization of gasses currently being flared.
The country has reduced gas flaring to a very minimal level of 8%. H.E. Sylva also recalled that in 2020, the Ministry of Petroleum Resources introduced the National Gas Expansion Program and declared 2020 as the ‘year of gas’ and 2021 the start of a ‘gas decade’ which will see the country utilize its gas resources and end flaring by 2025.
Nigerian National Petroleum Corporation (NNPC) has concluded negotiations to raise $1 billion for the rehabilitation of the Port Harcourt refinery. The funds raised will allow the corporation to undertake a complete overhaul of the largest state-owned refinery expected to begin at the end of the first quarter of 2021. The funding arrangement led by African Export-Import Bank has paved the way for the NNPC to move to the commercial stage of pre-qualifying bids submitted by local and international companies for the Engineering, Procurement, and Construction contract award for the rehabilitation of 210,000 barrels per day (bpd) Port Harcourt refinery.
SENEGAL
Russian oil company Lukoil said it is still working to obtain a share in the offshore block in Senegal containing the Sangomar development after its first attempt to buy Cairn Energy’s share in the project was blocked in 2020 by Woodside, which exercised its pre-emption rights as a partner in the block.
In a statement, FAR Limited said it had received a conditional non-binding indicative proposal from PJSC Lukoil, one of the world’s largest publicly traded energy companies, to acquire 100% of the shares of FAR at A2.2c cash per share. The Lukoil Proposal value for FAR is at A$220 million ($171 million). FAR cautioned that the Lukoil Proposal is not a legally binding offer. It is subject to targeted and timely corporate due diligence on FAR, and final Lukoil board approval, and it is uncertain that the Lukoil proposal will take effect.
Lukoil has stated that the price proposed represents a higher value for FAR shareholders than both the proposed sale of the RSSD project to Woodside and the incomplete proposal from Remus Horizons. FAR has not received a binding offer from Remus. Namely, FAR has already had a conditional non-binding indicative proposal from Remus Horizons to engage in further discussions and further investigations to evaluate its capacity to make an offer or announce an intention to make an offer to acquire 100% of the shares of FAR at 2.1c cash per share.
Meanwhile on January 20, 2021 FAR executed a sale and purchase agreement with Woodside for the Senegal sale. FAR’s shareholders were also due to consider authorizing the agreement with Woodside at the shareholders’ meeting to be held on February 18. However, FAR has not accounted for the Lukoil proposal coming in, which means that the shareholders’ meeting will be rescheduled again. Lukoil has stated that its proposal will be funded from available internal cash reserves and that any formal binding offer would not include any financing conditions. Lukoil has also stated that it has a deep understanding of the RSSD project as it has previously completed due diligence and entered into an agreement to acquire an interest in the RSSD project from Cairn Energy, which was subsequently pre-empted by Woodside.
GLOBAL
On February 18, oil prices rallied again to hit 13-month highs as concerns that a rare cold snap in Texas could disrupt U.S. crude output for days or even weeks prompted fresh buying. The U.S. West Texas Intermediate crude futures gained 46 cents to $61.60 a barrel, while Brent crude futures were up 56 cents, or 0.9%, at $64.90 a barrel at 07:44 GMT.
The U.S. Energy Information Administration’s (EIA) weekly report released on February 18 showed that crude inventories declined by 7.258 million barrels last week against analysts’ expectations for a draw of 2.43 million barrels.
In recent months oil prices have been supported by a tightening of global supplies, mainly due to production cuts from the Organization of the Petroleum Exporting Countries and allied producers (OPEC+). OPEC+ producers are likely to ease curbs on supply after April based on the recovery in prices.
Meanwhile, Texas’ freeze entered the sixth day on Thursday, as the largest energy-producing state in the U.S. grappled with massive refining outages and oil and gas shut-ins that rippled beyond its borders into Mexico. According to Wood Mackenzie analysts, roughly 1 million bpd of crude production has been shut down, and complete restoration could take weeks. Interestingly, U.S. crude imports rose by 41,000 bpd last week, but Cushing saw a 3-million-barrel net drop, offsetting that. The EIA also estimated a 200,000 bpd in production overall.