Market Report: Nigeria’s Petroleum Industry Act to Increase Oil Production Output

The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Learn more about Gladius Commodities at www.gladiuscommodities.com.

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NIGERIA

The Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva has stated that Nigeria’s Petroleum Industry Act will assist Nigeria in increasing its oil production to four million barrels per day (bpd). Minister Sylva stated that the Act will also boost oil reserves from 37 billion barrels to 40 billion barrels, while also drawing on the country’s estimated 600 trillion cubic feet of natural gas reserves to provide clean and efficient energy. The Minister noted that the new law has enhanced the Nigerian petroleum industry’s reputation, provided the pathway to new investments, and consolidated the country’s ability to play a significant role in meeting the world’s growing demand for energy. These resources will be crucial in supplying world markets with a broad portfolio of energy options, as well as supporting the global endeavor to alleviate energy poverty as envisioned in the United Nations’ Sustainable Development Goal 7.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Mele Kyari, disclosed the Corporation’s plans to rebuild key roads used in transporting petroleum products through the Federal Government Tax Credit Scheme. Alhaji Kyari said this during a meeting with downstream stakeholders in Abuja. Present at the meeting were NNPC, the Petroleum Tanker Drivers, the National Association of Road Transport Owners, Department of Petroleum Resources, Federal Ministry of Works, Federal Inland Revenue Service, Department of State Services, Federal Road Safety Corps and Nigeria Union of Petroleum and Natural Gas Workers.

GABON

Oil and gas company BW Energy has been provisionally awarded operatorship of two blocks in the 12th Offshore Licensing Round in Gabon. The award by the Director Generale des Hydrocarbures (DGH) in Gabon is subject to finalizing Production Sharing Contracts (PSC) with the DGH. The two blocks – G12-13 and H12-13 are adjacent to BW Energy’s Dussafu licence offshore Southern Gabon. The blocks cover an area of 2,989 km2 and 1,929 km2 respectively. The blocks will be held by a consortium composed of BW Energy as the operator (37.5%), VAALCO Energy (37.5%) and Panoro Energy (25%) as non-operating joint venture partners. The PSCs will have an exploration period totaling eight years with a possible extension by a further two years. The partners have committed to drilling exploration wells on the blocks during the exploration period and intend to carry out a 3D seismic acquisition campaign on both blocks.

GLOBAL

On October 14, oil prices rose after top oil producer Saudi Arabia dismissed calls for additional Organization of the Petroleum Exporting Countries and allies (OPEC+) supply and the International Energy Agency (IEA) said surging natural gas prices could boost demand for oil among power generators. The U.S. West Texas Intermediate crude futures rose 55 cents to $80.99, while Brent crude futures gained 62 cents to $83.80 a barrel at 12:57 p.m. EDT (16:57 GMT). The U.S. Energy Information Administration’s (EIA) weekly report for October 13 showed crude inventories increased by 6.088 million barrels for the week ending October 8, against analysts’ expectations for a build of 702,000 barrels.

The market trimmed gains after U.S. crude inventories rose more than anticipated as refiners cut production in a generally slower period for those facilities. The IEA said oil demand is set to jump by half a million bpd as the power sector and heavy industries switch from more expensive energy sources, warning that the energy crunch could stoke inflation and slow the world economic recovery from the pandemic. It expected world demand for oil is to rise to 99.6 million barrels per day in 2022, up 3.3 million bpd from its previous estimate. Meanwhile, Saudi Arabia dismissed calls for additional OPEC+ production increases, saying OPEC+ unwinding of production cuts protects the oil market from wild price swings seen in natural gas and coal markets. At its meeting this month, OPEC+ stuck to its previous agreement to increase output by 400,000 bpd. U.S. shale producers have been reluctant to invest in raising output after years of weak returns. U.S. production remains short of late 2019’s record at nearly 13 million bpd. The White House has been in discussions with oil and gas producers about fuel costs, with retail gasoline prices at seven-year highs and winter heating bills expected to rise.

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