Page 9 - FSUOGM Week 01 2021

FSUOGM COMMENTARY FSUOGM

China fared better than
most other economies
in 2020, managing to
suppress the spread of
the virus quickly.

– and could not put into storage either, since they the future growth engines of global oil demand.
lacked the facilities to do so. Prior to the coronavirus (COVID-19) pan-
Nigeria, for example, found itself stuck demic, the Paris-based International Energy
repeatedly during the spring with dozens of Agency (IEA) projected that the two countries
unsold oil cargoes, and its attempts to attract would drive global oil demand growth until
buyers with price discounts did not always suc- 2040. (India is set to overtake China as the latter
ceed. Angola also experienced similar problems, reaches peak demand around 2030, though.)
though on a smaller scale. The IEA’s prediction is likely to hold, despite
At the same time, market conditions also the dramatic impact the pandemic has had
affected a number of major investment initia- on the world’s energy landscape. As such, the
tives. Low prices, sluggish demand and lock- success of China and India’s post-COVID-19
downs delayed final investment decisions (FIDs) economic recovery efforts will go a long way
on several projects, including Eni’s Agogo field, in helping to support oil prices this year. Both
located offshore Angola. They also led some countries are likely to see firm growth in oil
companies to hand their African assets over to demand in 2021, though their responses to last
their partners; for example, FAR Ltd (Australia) year’s oil prices collapse were very different.
and Cairn Energy (UK) both opted to quit the China fared better than most other econo-
Sangomar field offshore Senegal, and their stakes mies in 2020, managing to suppress the spread of
were eventually bought out by Woodside Petro- the virus quickly. And despite Chinese economic
leum (Australia), the project’s operator. activity remaining relatively subdued for much
The same factors also forced the cancellation of the year, importers ramped up their crude
or rescheduling of licensing rounds in multiple purchases to record highs. In a bid to capitalise
countries, including but not limited to Nigeria, on bargain-basement prices, China imported an
Liberia and Angola. Likewise, they led Somalia average of 11.09mn barrels per day in the first 11
and other countries to conduct their bidding months of last year, up from 10.11mn bpd in the
rounds online rather than in person. same period of 2019.
The delays and disruptions also coincided The surge stressed the country’s import
with an upsurge in Western concern over cli- storage and handling capacity, with queues of
mate change – and mounting calls for banks of tankers reportedly moored off Chinese ports
all kinds to restrict lending for projects involving for weeks on end. The country’s buying frenzy
fossil fuels. These developments have made some eased somewhat towards the end of the year, as
African officials more eager than ever to get the the backlog of imports was cleared and private
oil and gas sector back on track, so as to max- refiners ran out of import quotas.
imise hydrocarbon revenues in advance of the However, a raft of new storage capacity in the
anticipated transition to less carbon-intensive works, Beijing’s decision to award higher import
technologies. Officials in Nigeria, for instance, quotas for 2021 and news that OPEC+ is arguing
have said they want members of Parliament to over a possible relaxation of oil production curbs
pass the Petroleum Industry Bill (PIB) that was all suggest that China could launch another wave
submitted for consideration in August as quickly of oil buying this year, especially in the run-up to
as possible so that the country does not lose out the Lunar New Year.
on any more oil and gas earnings. India, meanwhile, struggled to contain the
spread of the virus last year, and its difficulties
Asia: Engines of growth led to the introduction of widespread and severe
While all eyes are on OPEC+ this week, awaiting social quarantine measures. The country has
its decision on whether or not to relax produc- reported more cases of COVID-19 infections
tion curbs, the oil market’s longer-term recovery than any other country outside the US, and
prospects reside with the economic fortunes of widespread national and local lockdown meas-
the world’s demand centres. ures caused refinery run rates to collapse in the
China and India have long been hailed as middle of the year.

Week 01 06•January•2021 www. NEWSBASE .com P9