Page 6 - AfrOil Week 01 2021

AfrOil COMMENTARY AfrOil

The group also urged greater protection for prevent Nigeria from maximising the potential
contracts, saying: “[The] PIB does not provide of its deepwater fields, OPTS added. “Deepwater
clear assurances to investors with regards to the provisions in the PIB do not provide a favourable
sanctity of existing contracts at conversion or on environment for future investments and launch-
how and when NNPC liabilities will be settled ... ing projects,” it said. “[The] PIB does not provide
An investor’s ability to realise return on capital clear assurances to investors with regards to the
under which the investment decision was made sanctity of existing contracts at conversion or on
is essential to competing for additional capi- how and when NNPC liabilities will be settled.”
tal. Lack of contract sanctity compromises the The fact that the PIB has drawn this type of
integrity of investments and negatively impacts responses may make discussions in the National
investor confidence and willingness to further Assembly more heated in the near future. It is
invest and engage in long-term in Nigeria.” not clear, though, whether the criticism will
If these gaps are not covered, they could serve to delay the bill’s passage any further. ™

2020: A long, strange year

After dominating the year, concerns about OPEC+ production quotas

and fallout from the COVID-19 pandemic are spilling over into 2021

WORLD oil markets have never quite recovered to market in the hope of gaining more market
WHAT: all of the ground they lost between mid-2014 share. (It also led other members of the group to
The National Assembly and early 2016, when prices for Brent crude and follow suit.) This rapid increase in supply took
has resumed its review of West Texas Intermediate (WTI) plummeted place at a time when very little surplus crude
the PIB. from levels above $110 per barrel to less than could be consigned to inventory, as most storage
$30 per barrel. But in 2020, traders discovered facilities were almost completely full. As a result,
WHY: that there was more room for these two bench- prices plummeted even more than they might
Without a new law in marks to fall. have done otherwise – and the rest of the year
place, Nigeria will have On April 20, WTI prices hit unprecedented was taken up by attempts to repair the damage.
difficulty maximising the lows, sinking below zero for the first time in The clean-up campaign is not over. Never-
potential of its oil and gas history. (Brent, by contrast, hit a 19-year low theless, NewsBase’s editors are marking the start
resources. slightly below $20 per barrel on the same day.) of 2021 with a review of how each of the regions
Prices did not stay at these levels for long, but covered by our organisation was affected by the
WHAT NEXT: they have not regained all their strength either. events of the past 12 months.
As critiques emerge, the As of the beginning of 2021, both were trading
government still hopes near $50 per barrel, and some market observers Africa: Delays and disruption
to wrap up the legislative were speculating about the possibility of further Undoubtedly, Africa’s oil and gas sector has suf-
process in March or April.
declines, owing to disagreements over OPEC+ fered over the last year.
production curbs and new lockdowns to combat Falling energy prices and weakening demand
the coronavirus (COVID-19) pandemic. caused export earnings to sink, and the decline
In the end, OPEC+ kept the quotas in place. imposed significant hardships on major pro-
But this speculation was hardly misplaced, given ducers such as Nigeria and Angola, which are
that the quotas and COVID-19 were the main heavily dependent on oil export revenues. They
reasons why 2020 wreaked such havoc on the also left some of these producers with large vol-
energy sector. The pandemic (and the public umes of crude and LNG that they simply could
health measures taken to combat it) caused oil not sell – and could not put into storage either,
and gas consumption levels to plummet aston- since they lacked the facilities to do so.
ishingly quickly in the first half of the year, Nigeria, for example, found itself stuck
even as they upended predictions about future repeatedly during the spring with dozens of
demand. unsold oil cargoes, and its attempts to attract
At the same time, the lapse of the OPEC+ buyers with price discounts did not always suc-
production agreement at the end of March led ceed. Angola also experienced similar problems,
Russia and Saudi Arabia to bring much more oil though on a smaller scale.

P6 www. NEWSBASE .com Week 01 06•January•2021