Q1 2018: Here are four things to note

by | April 4, 2018 1:05 am

The first quarter of 2018 has come to an end. Below are four talking point of the quarter;

Boost from oil prices, production output

Nigeria’s economy is getting a helping hand from the rising crude oil prices and its growing production output. Oil prices have risen to about 3-year high of $70 per barrel and production has shot up to 1.8million barrels per day.

The country’s additional volumes will come from the NNPC, independents, and oil majors, key indigenous oil producers like Aiteo, Shoreline, and Seplat. About a dozen other local oil producers are pumping between 5,000 and 100,000 barrels each day. Together, they plan to add incremental supply of at least 150,000 barrels a day this year.

Scramble for $2bn Petrobras assets heats up   

There is a scramble for Brazilian Petrobras’s assets in Nigeria valued at $2 billion. The venture has stakes in two offshore blocks that contain two producing fields, the major Agbami field in OML 127, operated by a local Chevron affiliate and the Akpo field in OML 130 operated by Total SA. Sources say Glencore was looking to back Nigerian producer Seplat in bidding for the assets while Vitol is examining backing several bidders in the process. Swiss-based commodities trader Mercuria was involved in the initial bidding round but is unlikely to continue in the process. Oil major BP’s trading division had also considered participating in a possible consortium, but dropped out.

Don’t expect bid round anytime soon

In 2017, the federal government through the Department of Petroleum Resources (DPR) set guidelines for the marginal oil field bid round, which was scheduled to take place later that year or early 2018. At an interactive session with journalists during the inaugural Nigeria International Petroleum Summit (NIPS) in Abuja, Kachikwu said that President Buhari, being the substantive petroleum minister, needed to give approval for the exercise before it could continue adding that the President would have to examine the process as initiated so far, and sign it off, if he was satisfied with it, before it would continue. That sign off, he noted, had not come from the president hence, the standstill. With the elections fast approaching, no one should expect the bid round anytime soon.

Petroleum subsidy still mired in controversy

The petroleum subsidy never went away really despite the announcement by the Buhari administration in 2016 that the subsidy has been removed after imposing a pump price of N145 a litre.

However, the Nigerian National Petroleum Corporation (NNPC) financial report reveal that it spent N112.079 billion on fuel subsidy in the first 10 months of 2017, between January and October 2017. However, it is termed “under recovery”.

Under-recovery, in downstream petroleum marketing parlance, is when the expected open market price of PMS is below the approved official retail price at the pump. The difference with this current system of subsidy payment is the fact that the NNPC is making the payments to itself and not to other oil marketers as was the case in past subsidy regimes.