Page 7 - AfrOil Week 06 2020

AfrOil COMMENTARY AfrOil
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Previous demand shocks include the September 11 terror attacks and the SARS infection of 2003. Demand for oil has been relatively resilient in the years since the Great Recession, boosted by the rapid economic growth in China and India. An alliance between Saudi Arabia and Russia has helped prop up oil prices for the last three years. But the two big oil producers were far
from being in perfect harmony this week.
Cloud on the horizon
A further cloud on the horizon is the potential of an agreement being reached by the warring sides in Libya.
This is by no means certain, but if it happens, the restored oil output from Libya would dwarf the tentative production cuts proposed at the OPEC-plus talks last week. That would turn the current stern test for the cartel into a potentially
insurmountable challenge.
The coronavirus has struck at the heart of
global demand, with US prices dipping below $50 a barrel for the first time in more than a year. If prices do not recover, soon the budgets of nations from Saudi Arabia to Kazakhstan will suffer.
At a strategic level, the inability to reach a quick consensus has inevitably raised con- cerns about whether Saudi Arabia, the de facto leader of OPEC, and Russia are still able to work together to co-ordinate oil policy.
On the ground, serious action has been taken in China, where teeming cities have become ghost towns, flights have been cancelled and fac- tories and schools have been closed. In day-to- day life, in the economy – and in the commodity and energy markets – there is a lot at stake, and uncertainty is adding to the sense of crisis.™
BP mulls sale of Algerian gas project
INVESTMENT
“ output from Libya
would dwarf the production cuts proposed last week
Restored oil
ALGERIA
BP is on the search for a buyer for a major gas project in Algeria, responsible for almost 10% of the country’s national output, sources told Reuters on February 6.
The UK major had been in talks to transfer its 45.9% stake in In Amenas gas plant to Rus- sia’s state oil giant Rosneft, Reuters reported. But negotiations broke down because BP’s part- ner in the venture, Norway’s Equinor, did not want to work with Rosneft. The Russian firm, in which BP has a 19.75% stake, has been under US sanctions since 2014.
Equinor also controls a 45.9% interest in the project, which in addition to the plant includes pipelines and four wet gas fields in the Sahara Desert. The remaining 8.2% is held by Algeria’s national oil company (NOC) Sonatrach.
BP is hoping to fetch around $2bn from the sale, Reuters sources said. The UK major is in the midst of a major divestment programme,
having already shed $9.4bn of assets since the start of 2019. It aims to announce a further $5bn in deals by mid-2021.
As of press time, BP, Equinor, Rosneft and Sonatrach have not commented on the sale plan. But sources told Reuters that BP had in recent months got in touch with a number of interna- tional oil companies (IOCs) to test the market’s appetite.
The In Amenas project has a production capacity of 9bn cubic metres of gas, while total Algerian output averages around 92 bcm per year. In Amenas was the site of a deadly terrorist attack in January 2013 that led to 40 employees losing their lives. The security situation has since improved, as a result of an increased military presence.
BP is also partnered with Equinor and Sonatrach at a second, dry gas project in the Algerian Sahara, known as In Salah. ™
In Amenas gas plant (Photo: Oil and Gas Middle East)
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