Page 7 - AfrOil Week 11 2020

AfrOil COMMENTARY AfrOil
 Extra barrels on the way
Under normal conditions, such low oil prices would spur a recovery in fuel consumption, in turn triggering a rebound in prices. But with quarantine lockdowns coming into force across Europe and the US declaring a state of emer- gency, demand will be unresponsive.
Similarly, the closure of unprofitable pro- duction would also normally help rebalance the market. But Saudi Arabia has promised to increase its output by millions of bpd in less than two weeks.
Rystad estimates that up to 3mn bpd of extra oil will flood the market from April, including 2mn bpd from OPEC+ members based on their storage, spare capacity and ramp-up capabilities. They could add a further 800,000 bpd in May by utilising spare capacity to the full.
War-torn Libya, meanwhile, could contrib- ute a further 1mn bpd of supply if a ceasefire is reached and its output returns to pre-shut-in levels.
Saudi Arabia aims to increase production to 12.3mn bpd in the coming months. Its output could climb to 10.8-11.0mn bpd in April, from 9.8mn bpd, Rystad estimates, rising to 11.2mn bpd in May.
Without additional drilling, which will take longer than a few months, the kingdom’s maxi- mum production is capped at 11.5mn bpd. But it could empty its storage in order to meet its 12.3mn bpd target. Riyadh is targeting an addi- tional increase to 13mn bpd, but it is unlikely this could be achieved in 2020.
Russia, meanwhile, has said it can bring an additional 300,000 bpd on stream within 90 days, having produced 11.28mn bpd in Feb- ruary. While the country is able to achieve this, Rystad said it had assumed a more conservative growth of 200,000 bpd in its estimates.
The UAE could provide an extra 200,000 bpd in April and even more at a later stage by utilis- ing its entire spare capacity, while Kuwait could contribute 110,000 bpd and Iraq 250,000 bpd, Rystad believes.
Whether or not the supply war will go ahead is uncertain. But indications are that both Mos- cow and Riyadh are ready for a prolonged strug- gle for market share. The pair are also eager to push higher-cost shale drillers out of the market, and may not relent until they feel this goal has been achieved. On the other hand, the coronavi- rus’ ever-worsening impact on oil demand could result in them changing course.™
INVESTMENT
Nigeria’s Rivers State says modular refineries could reduce crude oil theft
NIGERIA
THE government of Nigeria’s Rivers State is mooting plans for the construction of multiple new modular refineries, saying that such facil- ities might help deter and reduce the theft and illegal processing of crude oil.
Deputy Governor Ipalibo Harry Banigo touted the programme at the weekend, during a series of meetings with representatives of the community youth development committees (CDCs) in all 23 of Rivers State’s local councils. She said that the administration saw modular refineries as perhaps the best solution to the problems that result from stolen oil.
Sending crude oil to a modular refinery has the potential to help foster legitimate trade while also reducing the amount of pollution gener- ated during illegal processing operations, she asserted.
She also argued that modular plants were more likely to promote the interests of poor people in Rivers State. Rivers is home to around 7mn people, she explained, and no more than 2,000 people are involved in the illegal acquisi- tion and refining of crude oil.
Banigo did not specify the likely cost of building these refineries or reveal further details. Indeed, she stressed that construction
could not begin without a green light from the relevant federal agencies.
The delay could have negative consequences, she said.
“Pollution is killing the soil, water, plants, etc. If nothing is done in the next 10 years, nobody knows what will happen to our people and who will live and who will not,” she remarked. “This is why we have been consulting all segments and layers of authority to get inputs for the move to help the youths and illegal refiners set up mod- ular refineries.”
The state government’s next step will be to start discussions with federal government agen- cies such as the Environment Ministry and the Department of Petroleum Resources, the dep- uty governor added.
Rivers will also try to begin talks with poten- tial lenders as well, she said.
Banigo also spoke directly with some of the residents of the state who attended the meetings. Many of those present alleged that the prob- lem of theft and illegal refining involved many important local figures, including representa- tives of the Nigerian Army and the national oil company (NOC), as well as unemployed and underemployed youths. ™
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