â€¢ Militancy returns, knocks off 150,000bpd
Ejiofor Alike in Lagos and Chineme Okafor in Abuja
The Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers, led by Russia, have approved the decision of the federal government to cap Nigeriaâ€™s oil production at a sustainable volume of 1.8 million barrels per day (mbpd).
The Joint OPEC and Non-OPEC Ministerial Monitoring Committee (JMMC) Monday held its fourth meeting in St. Petersburg, Russia, where it reviewed the June 2017 report, and also listened to the presentations made by the representatives of Libya and Nigeria on their production recovery plans, prospects and challenges.
But the decision of the JMMC came on the heels of reports that Nigeriaâ€™s attempt to grow the volume of crude oil it produces every day has suffered a setback, following the attack by militants on the Trans-Niger crude oil pipeline in the western Niger Delta early Monday, resulting in the shut in of 150,000bpd.
OPEC and non-OPEC producers led by Russia had agreed to cut oil output by a combined 1.8 million barrels per day from January 2017 until the end of March 2018.
However, Libya and Nigeria were exempt from the production cap to help their production to recover from destructions caused by internal strife.
But in a communiquÃ© issued at the end of Mondayâ€™s meeting, hosted by the Russian Federation, the JMMC said it welcomed the flexibility of Nigeria in this regard, â€œwhich despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement similar OPEC production adjustments as soon as its recovery reaches a sustainable production volume of 1.8 million barrels per dayâ€.
The JMMC, however, did not back capping Libyan output, saying its production was unlikely to exceed 1mbpd in the near future, compared to its capacity of 1.4m-1.6mbpd before unrest erupted in 2011 and plunged the nation into chaos.
The meeting reviewed the June 2017 report as well as the first six months of the Declaration of Cooperation, as submitted by the Joint OPEC and Non-OPEC Technical Committee (JTC).
Having reviewed the report of the JTC, including the presentations made by the representatives of Libya and Nigeria on their production recovery plans, prospects, and challenges, OPEC and non-OPEC producers said they acknowledged the upside limitations of both countries beyond their current production levels.
â€œOnce their production levels stabilise, participating producing countries should further cooperate in a manner that contributes to the stabilisation of the market.
â€œThe JMMC will continue to monitor and recommend further actions including the holding of an extraordinary conference of the 24 producing countries if needed,â€ said the communiquÃ©.
The committee noted that the oil market was making steady and significant progress towards rebalancing.
According to the communiquÃ©, this assertion was based on the report of the JTC for the month of June 2017, which reviewed market developments and the results of the first six months of progress made according to OPECâ€™s 171st Ministerial Conference Decision and the respective voluntary adjustments in line with the Declaration of Cooperation.
The meeting further stated that the continued strengthening of the global recovery was underway, with stability in the oil market remaining a key determinant, stressing that market volatility had been lower in recent weeks and investment flows had visibly started to improve in the industry.
According to the JTC report, there are several positive indicators going forward.
Oil demand is expected to increase significantly in the second half of 2017 compared to first half of 2017, with the growth reaching a level of 2mbpd, which should sustain the inventory draws.
Furthermore, the participating OPEC and non-OPEC producing countries achieved a conformity level of 98 per cent in June 2017.
In addition, the same level of high conformity was observed for the first six months of January to June 2017. Between January and June 2017, the participating producing countries adjusted their production downwards by an estimated volume of 351 million barrels, the communiquÃ© explained.
The JMMC added that it would continue to engage with all participating countries individually, in particular, those that were yet to achieve 100 per cent conformity for the remaining period of the Declaration of Cooperation.
Also commenting at the opening of the JMMC, OPEC Secretary General Mohammed Barkindo assured other producers that Nigeria had no intention of going beyond its oil production target of 1.8mbpd until the end of March 2018.
He also said Libya has an output target of 1.25 million bpd by December, but it remains a target given the challenges the country faces.
Brent oil prices rose about 1 per cent to $48.50, helped by news of a cap on Nigeria and by comments from Saudi Energy Minister Khalid al-Falih that the Kingdomâ€™s exports would fall to 6.6mbpd in August as demand at home was rising, effectively representing a cut of 1mbpd year-on-year.
Oil Militancy Knocks off 150,000bpd
But as news of Nigeriaâ€™s acceptance to cap output at a sustainable 1.8mbpd was announced, the countryâ€™s target to grow daily production to 2.2mbpd as provided in the 2017 budget, suffered a setback following the attack on the Trans-Niger crude oil pipeline in the western Niger Delta in the early hours of Monday, resulting in the shut in of 150,000bpd.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, disclosed this Monday on the sidelines of the extraordinary session of the council of ministers of the African Petroleum Producers Organisation (APPO) in Abuja.
He said a fresh militant attack on the Trans-Niger crude oil pipeline in the Niger Delta area was recorded by the country in the early hours of Monday, adding that up to 150,000bpd would be shut in from the pipeline breach.
According to data from Shell Petroleum Development Company (SPDC), the Trans-Niger Pipeline (TNP) crisscrosses the Ogala, Alakiri, Cawthorne Channel and Bonny areas of the western Niger Delta, transporting about 180,000bpd to the Bonny export terminal in Rivers State.
The pipeline is operated by SPDC under a joint venture with NNPC, Nigerian Agip Oil Company (NAOC) and Total E&P, and is part of the gas liquids evacuation infrastructure system critical to the Afam VI power plant and liquefied gas exports.
â€œUnfortunately, we have not been able to sustain it (oil production) because we got challenges. As I am talking to you this morning, the Trans-Niger pipeline has been breached in Ogoniland and that is 150,000 barrels of oil that have been knocked off. That has been an issue with that area,â€ said Baru.
He added that NNPC and its partners would continue to dialogue with the community and expressed hope that production would be restored.
Also speaking at the conference, Acting President Yemi Osinbajo warned that the days of crude oil as a coveted natural resource were fast coming to an end.
He advised Nigeria and other African oil producers to sit up to the reality and make swift efforts to use the oil revenues they generate today to plan for a future without oil or risk being taken unawares.
The acting president also said recent developments where countries such as Japan, China, France and the Scandinavian countries had set dates to produce and use only electric vehicles should be a source of worry for African countries with oil.
â€œThis session holds at a very significant time for our continent and countries; at a time when we as a continent and indeed the rest of the world are witnessing volatility in the oil market and by implication our local economies.
â€œOver the last three years or so, oil producing countries across the world have experienced the full impact of the drop in oil prices with significant negative impact on government revenues and budgets and on the value of national currencies.
â€œThe reality of a future where demand for and revenues from oil drop sharply is already upon us and almost every major oil importing country today has embarked on an aggressive non-fossil fuel alternative,â€ said Osinbajo.
He added: â€œChina, Japan, France and some Scandinavian states have already set dates within the next 10 to 15 years to produce and use only electric vehicles. The zero oil days are clearly around the corner.
â€œWe know, of course, that the prosperity of Africa ultimately lies in its human resources and talents and not in anything that we extract from the earth.
â€œBut as the world begins to move in the direction of alternative and clean energy, the reform of APPO should factor in these new realities and aim to reposition the organisation as a clear leader in this regard.â€
He equally explained that there was a connection between rising acts of terrorism across the globe and illegal mining and sale of stolen crude oil, and asked the members of APPO to develop in their reform of the organisation, systems that track the volume of oil they produce and export.
â€œPermit me to mention a matter of immediate concern. Around the world today we are increasingly seeing crude oil often of untraceable origins, funding the activities of terrorist groups and other purveyors of violence and conflict.
â€œMany of these groups constitute a threat or are a potential threat to the safety and security in many of our member states.
â€œAPPO reforms, therefore, need to build capacity to maintain a reliable statistical database and to deploy technology to track every molecule of crude oil extracted from our territories.
â€œThis is an important step not only for global security, but also for fiscal transparency, sustainability and, of course, through the required levels of international collaboration,â€ Osinbajo stated.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had earlier in his address reiterated Osinbajoâ€™s warning when he said that â€œcrude oil was on the verge of being phased out as a result of improvements in technologyâ€.
Kachikwu said: â€œTechnology is moving at a fast pace. The oil world is fast disappearing and with current trends in technology and environmental concerns, it is clear that over the next 20 to 30 years, oil will become a fading if not a faded product.
â€œWhat this means is that most countries that harbour oil have only about 30 years to harness, explore, find and enjoy the full benefits of oil. Because after that, most consumers of oil would have moved on to a cleaner source of energy.â€