Page 6 - MEOG Week 01 2021

MEOG REVIEW MEOG

A long, strange

year: 2020 in review

2020 WORLD oil markets have never quite recovered some of these producers with large volumes of
all of the ground they lost between mid-2014 and crude and LNG that they simply could not sell –
early 2016, when prices for Brent crude and West and could not put into storage, since they lacked
Texas Intermediate (WTI) plummeted from the facilities to do so.
levels above $110 per barrel to less than $30 per Nigeria, for example, found itself stuck
barrel. But in 2020, traders discovered that there repeatedly during the spring with dozens of
was more room for these two benchmarks to fall. unsold oil cargoes, and its attempts to attract
On April 20, WTI prices hit unprecedented buyers with price discounts did not always suc-
lows, sinking below zero for the first time in his- ceed. Angola also experienced similar problems,
tory. (Brent, by contrast, hit a 19-year low slightly though on a smaller scale.
below $20 per barrel on the same day.) Prices At the same time, market conditions also
didn’t stay at these levels for long, but they haven’t affected a number of major investment initia-
regained all their strength either. As of the begin- tives. Low prices, sluggish demand and lock-
ning of 2021, both were trading near $50 per bar- downs delayed final investment decisions (FIDs)
rel, and some market observers were speculating on several projects, including Eni’s Agogo field,
about the possibility of further declines, owing to located offshore Angola. They also led some
disagreements over OPEC+ production quotas companies to hand their African assets over to
and new lockdowns to combat the ongoing coro- their partners; for example, FAR Ltd (Australia)
navirus (COVID-19) pandemic. and Cairn Energy (UK) both opted to quit the
This speculation is hardly misplaced, given Sangomar field offshore Senegal, and their stakes
that OPEC+ production quotas and COVID-19 were eventually bought out by Woodside Petro-
were the main reasons why 2020 wreaked such leum (Australia), the project’s operator.
havoc on the energy sector. The pandemic (and The same factors also forced the cancellation
the public health measures taken to combat it) or rescheduling of licensing rounds in multiple
caused oil and gas consumption levels to plum- countries, including but not limited to Nigeria,
met astonishingly quickly in the first half of the Liberia and Angola. Likewise, they led Somalia
year, even as they upended predictions about and other states to conduct their bidding rounds
future demand. online rather than in person.
At the same time, the lapse of the OPEC+ The delays and disruptions also coincided
production agreement at the end of March led with an upsurge in Western concern over cli-
Russia and Saudi Arabia to bring much more oil mate change – and mounting calls for banks of
to market in the hope of gaining more market all kinds to restrict lending for projects involving
share. (It also led other members of the group to fossil fuels. These developments have made some
follow suit.) This rapid increase in supply took African officials more eager than ever to get the
place at a time when very little surplus crude oil and gas sector back on track, so as to max-
could be consigned to inventory, as most storage imise hydrocarbon revenues in advance of the
facilities were almost completely full. As a result, anticipated transition to less carbon-intensive
prices plummeted even more than they might technologies. Officials in Nigeria, for instance,
have done otherwise – and the rest of the year have said they want members of Parliament to
was taken up by attempts to repair the damage. pass the Petroleum Industry Bill (PIB) that was
The clean-up campaign is not over. Neverthe- submitted for consideration in August as quickly
less, NewsBase’s editors are marking the start of as possible so that the country does not lose out
2021 with a review of how each of the regions on any more oil and gas earnings.
covered by our organisation was affected by the
events of the past 12 months. Asia: Engines of growth
While all eyes are on OPEC+ this week, awaiting
Africa: Delays and disruption its decision on whether or not to relax produc-
Undoubtedly, Africa’s oil and gas sector has suf- tion curbs, the oil market’s longer-term recovery
fered over the last year. prospects reside with the economic fortunes of
Falling energy prices and weakening demand the world’s demand centres.
caused export earnings to sink, and the decline China and India have long been hailed as
imposed significant hardships on major produc- the future growth engines of global oil demand.
ers such as Nigeria and Angola, which are heavily Prior to the coronavirus (COVID-19) pan-
dependent on oil export revenues. They also left demic, the Paris-based International Energy

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