Page 8 - DMEA Week 10 2020
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DMEA COMMENTARY DMEA
Financial strain
Local experts have acknowledged the problem. Biodun Ogunleye, the managing director of PowerCam Nigeria, told The Nation several days ago that the country was in a tight spot and might not be able to implement this year’s budget. “Given the fact that Nigeria is heavily dependent on crude oil for sustenance, coupled with the fact the country has benchmarked its 2020 budget of NGN10.59tn [$29.1bn] at $57 per barrel, what I can say is that Nigeria is in
trouble,” he remarked.
According to Ogunleye, signs of trouble are
already evident, in that the balance of Nigeria’s Excess Crude Account (ECA) has fallen by $253mn within the last two months. ‘’The prices of crude oil are falling globally, coupled with the fact that they are having reverberating effects on Nigeria’s Excess Crude Account,” he said. “This implies that the country has no choice [but] to hope for an increase in the prices of crude oil in the next few weeks, if it wants to grow its econ- omy well.”
Unsold oil
Under these conditions, Nigeria has simply not been able to sell as much oil as it would like to do. Bloomberg reported last week that trad- ers were having a hard time finding buyers for Nigerian crude, partly because Chinese demand was down but also because European refinery
operators were worried about low margins. As of March 5, trading sources indicated, around 85% of the Nigerian cargoes slated for loading in April were still unsold, up from the usual level of about 50% at this point in the trading cycle.
(According to the sources, who specialise in West African crude grades, Nigeria and Angola are trying to sell about 100 April-loading cargoes altogether. Angola has sold off about half of its share but is still looking for buyers for 18 cargoes, while Nigeria is still attempting to unload 55 car- goes, the sources said.)
But the problem does not end there. Nigeria is not the only African producer suffering; accord- ing to Bloomberg’s sources, traders have also been hard-pressed to find buyers for April-load- ing cargoes of Angolan crude. Meanwhile, Nige- ria, Angola, Chad, Gabon and the Republic of Congo are all struggling to unload the oil that they failed to sell in March, and they are likely to have an even harder time as the unsold April-loading barrels come into play.
In other words, Nigeria is, along with other African producers, contributing to perceptions of a global oil supply glut. If conditions do not change, the West African country will have a difficult time on multiple fronts – financially, because it is so dependent on crude revenues, and operationally, because it will surely strug- gle to meet output targets if lower prices render some upstream projects unviable.
TRANSPORT
Dangote outlines plan for offshore gas pipeline
NIGERIA
Nigeria’s Dangote group hopes to build a high- capacity subsea gas pipeline system.
NIGERIA’S Dangote Industries Ltd (DIL) has outlined plans for the construction of a high-ca- pacity subsea pipeline capable of handling more than 31bn cubic metres per year of associated gas from offshore oilfields.
Devakumar Victor Edwin, DIL’s executive director for strategy, capital projects and portfo- lio development, told the Blueprint newspaper that the group was seeking to build a 1,100-km offshore pipeline network serving oilfields in the Niger River Delta region. The system will have a throughput capacity of 3bn cubic feet per day (equivalent to 84.96mn cubic metres per day, or 31.03 bcm per year), he said.
It will be the largest subsea gas transportation network in the world, he added.
Edwin went on to say that DIL had drawn up plans for the pipeline within the framework of a wider effort to establish an industrial complex in the Lekki Free Trade Zone (FTZ) in Lagos. The link will be able to deliver feedstock to the gas-processing plant, petrochemical complex
and fertiliser plant that DIL intends to build in the FTZ, he explained.
The group has put the cost of constructing the pipeline and the onshore facilities at several bil- lion dollars, but has not yet put forward a more specific figure. Instead, it has stressed the envi- ronmental and economic benefits of the project, pointing out that the link will greatly reduce associated gas flaring at offshore oilfields.
Edwin referenced this point, noting that the pipeline system was being built specifically for the purpose of bringing large volumes of associ- ated gas to market. “[This] is all offshore gas that we shall trap and cap,” he remarked.
DIL has also asserted that the project will benefit Nigeria in other ways. It says the con- struction of the pipeline will support domes- tic gasification initiatives in Nigeria, reduce dependence on imported fuels, generate addi- tional budget revenue, increase foreign exchange reserves and create thousands of jobs, both directly and indirectly.
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