IEA: OPEC, Non-OPEC Oil Output Cut Agreement Is An Accomplished Mission

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*NNPC’s engineering subsidiary improves 2017 earnings with big-ticket jobs

Chineme Okafor in Abuja

The crude oil production cuts agreement signed by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and its non-OPEC allies led by the Russian Federation, to rebalance the international oil market has been adjudged an accomplished mission by the International Energy Agency (IEA) for the level of success it said the pact has recorded since 2016 when it was signed.

The IEA, which was founded in 1974, to help countries coordinate a collective response to major disruptions in the supply of oil, stated in its March 2018 Oil Market Report (OMR) that within its review of the market and production cut agreement of OPEC and its allies, their participation have been immense with some of them doing more than they initially promised.

The OMR was obtained by THISDAY on Friday in Abuja. It contained IEA’s energy forecast.

It said the overall state of the cuts in March showed that OPEC’s compliance rate was 163 per cent while that of non-OPEC producers was 90 per cent.

The IEA said the impacts of this on stocks level have been substantial, adding that while it could not declare on behalf of the group that their efforts was an accomplished mission, it however looks to be from its point of view.

“As far as the OPEC/non-OPEC output cuts are concerned, some countries party to the 2016 Vienna agreement, have, for different reasons, seen production fall by more than they promised. These extra cutbacks total over 800kb/d.

“To all intents and purposes, more than a second Saudi Arabia has been added to the output agreement. The overall state of the cuts in March shows OPEC’s compliance rate at 163 per cent with its non-OPEC partners achieving a rate of 90 per cent,” said the IEA in the OMR.

It further stated: “With just under half of global oil supply subject to restraint and oil demand growing steadily, the impact on stocks has been substantial. The text of the Vienna agreement notes that OECD and non-OECD stocks were above the five-year average and states that they should fall to ‘normal’ levels. Normal is assumed to mean, although it does not explicitly say so, the five-year average. There is less clarity with regard to non-OECD stocks, so five-year average OECD stocks have become the de facto target to measure success of the output cuts.

“Since May last year they have fallen constantly, the average and new data for February show a larger than usual fall in volume terms with stocks now only 30 million barrels (mb) above the five-year level, and product stocks actually below it.”

“Our balances show that if OPEC production were constant this year, and if our outlooks for non-OPEC production and oil demand remain unchanged, in 2Q18-4Q18 global stocks could draw by about 0.6mbd. With markets expected to tighten, it is possible that when we publish OECD stocks data in the next month or two they will have reached or even fallen below the five-year average target.

“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” added the IEA.

It said on the prices of oil in the global market, that political uncertainty in the Middle East has returned to force prices up above the $70 per barrel mark.

“As we write, uncertainty about the next steps in Syria and Yemen have helped propel the price of Brent crude oil back above $70/b. It remains to be seen if recently elevated prices are sustained and if so what are the implications for the market demand and supply dynamics,” said the IEA.

The IEA equally noted that its overall view of global demand and supply growth in 2018 has remained unchanged from that of last month, adding that it expected oil demand to grow by 1.5mbd in 2018, irrespective of an element of risk to the outlook from the current tension on trade tariffs between China and the United States.

Meanwhile, an engineering subsidiary of the Nigerian National Petroleum Corporation (NNPC), the National Engineering and Technical Company Limited (NETCO), has disclosed that it made up to N3.257 billion as profit from its business activities in 2017.

NETCO also stated that it paid its shareholders a dividend of N750 million from the profit which it said accrued to it from its execution of big ticket jobs in the industry.

A statement from the Group General Manager, Public Affairs of the NNPC, Mr. Ndu Ughamadu, explained that the company’s revenue increased by 122 per cent from N10.13 billion in 2016 to N22.46 billion in 2017.

The statement quoted NETCO’s board chairman, who is also NNPC’s Chief Operating Officer, Upstream, Mallam Bello Rabiu, to have explained that the operating profit of NETCO increased by 134 per cent, from N0.89 billion in 2016 to N2.07 billion in 2017.

Rabiu stated this at NETCO’s 2017 Annual General Meeting (AGM) in Abuja.

He noted that the impressive result was the outcome of improved performance in project execution and cost reduction measures put in place during the period, in addition to the new addition of construction and procurement portfolios in its activities basket.

He also stated that the profit before tax of the company decreased by 34 per cent in the year under review when compared with N4.90 billion of the previous years, stressing that the decrease was attributable to the foreign exchange gains which constituted 56 per cent before tax in 2016 as compared to 4.8 per cent gain in 2017.

Rabiu said NETCO also cashed in on the strong support of NNPC’s Group Managing Director, Dr. Maikanti Baru, and it shareholders.

He said: “The strong support of the GMD, that of the shareholders, in addition to award of some big-ticket jobs which NETCO delivered on time, within budget and without compromising on quality of service delivery, made it possible for the remarkable figures. The performance has reinforced to all stakeholders that given the right environment, NETCO is poised to greater heights.”

According to him, for the first time since the establishment of NETCO, it paid to its shareholders the highest dividend in any given year of N750 million.

Similarly, Baru, who received the cheque for the dividend, commended the management of NETCO, and assured them of his continued support.

Baru said that based on its performance, he would ensure NETCO got more projects, especially in the gas sector.

He equally congratulated the outgoing Managing Director of NETCO, Mr. Siky Aliyu, who would reportedly retire from his position in May 2018.