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As Organization of Petroleum Exporting Countries (OPEC) and allied members unveils new plans of production cut to reduce an oil glut, France’s Total is poised to begin exports from the new ultra-deep Egina oil field offshore Nigeria in February 2019, at an initial rate of just over 100,000 bpd which could double in the following months.
Quoting a copy of a loading program for the new grade it had seen, Bloomberg reported that Shipments of Egina crude from a floating offshore production vessel have been scheduled for February while the extra supplies will arrive at an awkward moment for an oil market that’s seen prices for benchmark Brent and West Texas Intermediate grades plunge by more than $30 a barrel since early October.
The timing of the new field start-up coincides with OPEC and non-OPEC production cuts of 800,000 barrels, or 2.5 percent of members daily output, from which Nigeria wasn’t spared this time around which will see its daily oil production drop by a minimum of 40,000 barrels a day.
“Supported by both the oil and non-oil sector; the Oil and gas sector will benefit from higher oil production (2019f: 2.1mb/b vs. 2019e: 1.9mb/d), in view of expected on-streaming of Total’s 200kbpd Egina oil field and subsisting low-base effect in the sector,” Omotola Abimbola, a research analyst at Ecobank told BusinessDay.
Despite some concerns over the stability of Nigeria’s oil operations ahead of the February elections, exports of 200,000 barrels a day would make Egina a bigger grade than all bar three Nigerian crudes, based on January loading-program data compiled by Bloomberg.
“The news about Total export plans is good news for Nigeria’s oil production, however the OPEC production cut is really a big challenge,” Femi Akinbobola an energy analyst at Sofidam Capital limited said.
News about France Total’s export plans also comes as oil prices continue to be depressed by market fears that the cuts may not be enough to erase the oversupply, especially if fears of slowing global economic growth materialize.
Brent crude futures were down 37 cents at $53.45 a barrel as U.S. crude futures lost 72 cents, or 1.6 percent, to $44.87, falling below $45 for the first time since July 2017.
Brent fell 11 percent last week and hit its lowest level since September 2017, while U.S. futures slid to their lowest since July 2017.
Akinbobola explained that the government will be faced with a dilemma of either increasing its oil revenue or incurring the wrath of OPEC through increase in oil production.
The Egina oil field project is based on a subsea production system connected to a floating production, storage and offloading (FPSO) unit. The field’s production capacity is forecast at 200,000 bpd—around 10 percent of Nigeria’s total oil production, the project operator Total says.
Nigerian oil output has stagnated in the past decade due to instability in the restive oil-rich Niger Delta and under investment in its oil sector along with a lack of infrastructure.
Nigeria’s crude oil export fell marginally, in the third quarter of 2018, averaging 1.39 million barrels per day, The Central Bank of Nigeria said in its newly released report. This figure represents a decline of 0.7 percent in comparison with the crude oil export of preceding quarter, at 1.40 million barrels per day.
On the other hand, Nigeria’s crude oil production, declined slightly, which including condensates and natural gas liquids, was estimated at an average of 1.84 million barrels per day.
A total of 169.28 million barrels was produced in the third quarter.
The estimated decline in production was attributed, largely, to the ongoing outages on the Trans-Ramos pipeline and the force majeure on exports of Bonny light.
Allocation of crude oil for domestic refining also remained unchanged, at 450,000 barrels per day, but might change soon, after Ibe Kachikwu, the Minister of State for Petroleum Resources, had assured the country that Nigeria’s refinery capacity will reach 1.1 million barrels per day in 2020, with Dangote Petrochemical refinery’s 650,000, Nigeria’s four existing refineries and three new modular refineries coming on stream in two years.
According to Bloomberg estimates, 200,000 bpd in exports will make Egina the fourth biggest Nigerian crude grade in terms of volumes.
DIPO OLADEHINDE
