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NUPRC Contradicts NNPC on Nigeria’s August 2023 Crude Oil Output

The Nigerian Upstream Petroleum Regulatory Commission has released the country’s crude oil and condensate production output for August 2023.

It is a mere 1.181Million barrels of oil per day (MMBOPD) for crude and 1.415Million barrels of crude oil and condensate per day (MMBPD) for both fluids.

The combined crude and condensate output is clearly 200,000Barrels Per day less than the 1.67MMBPD that Mele Kyari, the CEO of NNPC, declared in public at the end of August 2023. It so happens that the August 2023 crude oil output figures are a mere 52,035BOPD increase from the July 2023 figure, contrary to the large increase that Mr. Kyar’s statement insinuated.

Indeed 1.181MMBOPD is the third lowest daily average recorded for a month between January 1 and August 31, 2023.

The Organisation of Petroleum Exporting Countries OPEC has published the same figures as NUPRC, apparently by simply receiving data from the regulator, the accredited agency to pronounce on the country’s hydrocarbon output data.

With the enactment of the Petroleum Industry Act (PIA), the NNPC has become a regular commercial entity and no longer the part-regulator, part-policymaker and part-commercial player that it was in the context of the NNPC Act, which is now defunct. But the NNPC keeps showing up in the public pronouncing statements it is not legally authorized to and the media, local and international, lap it up and distribute widely.


Nigeria’s Upstream E& P Needs More Efficiency, Crucial to Energy Transition

By Lukman Abolade

Roger Brown, the Chief Executive Officer of Seplat Energy Limited said while Nigeria’s upstream oil and gas development is critical to fund its energy transition, it also needs to be more efficient.

Brown was speaking at the 2023 Nigeria Annual International Conference and Exhibition (NAICE) of the Society Petroleum Engineers, Nigeria Council, themed: “Balancing energy accessibility, affordability, and sustainability: Strategic Options for Africa,” held on Monday in Lagos.

“Upstream oil and gas development is critical to the fund the transition but needs to be much more efficient, eliminate theft, flaring, leaks, and operate with low carbon intensity.

“Nigeria needs to move from reliance on diesel/PMS generators, this will improve health, and lower cost of electricity, which is severely holding back developments in oil sectors. Gas is the transition solution,” he said.

The Seplat boss told participants that investment needed to achieve net zero targets by 2050 is projected at $3.5Trillion per annum; which is around 1.3% of annual global Gross Domestic Product (GDP), stressing that more than 500Million Africans have no access to energy and more than 900Million Africans do not have access to clean cooking energy.

While delivering his remarks, Gbenga Komolafe, Chief Executive Officer of Nigerian Upstream Petroleum Regulatory Commission (NUPRC), represented by Abel Nsa, the Head National Oil and Gas Excellence Centre (NOGEC) noted that despite Africa’s vast potential for renewable energy, only 5% of the region’s energy supply comes from renewable sources.

“Oil accounts for 50% of the region’s supply, followed by coal, natural gas, renewable energy accounts for only 5% of the region’s supply despite the regions vast potential for being solar and hydrogen power generations,”

Komolafe added that harnessing Africa’s vast array of natural and human resources the potential to stimulate economic growth and development, improvement its prosperity in line with UN goals.

“For us in the energy profession, especially in the upstream oil and gas industry, the future we envisage for the upstream is the one that will assure that gas will be responsible for a significant part of Nigeria’s energy use,” he said.

Mele Kyari, the Group Chief Executive Officer, (GCEO) Nigerian National Petroleum Company Limited (NNPCL), during his speech said although the country is not transitioning away from hydrocarbon, it hopes to record increase in use of clean energy.

Kyari who was represented by Adokiye Tombomieye, NNPCL’s Executive Vice President, Upstream, said in the past few years, the Nigerian energy industry has witnessed strategic transformation which gave birth to viable industry legislation, the Petroleum Industry Act (PIA), and a long-term gas-centered energy transition plan.

“Nigeria is not transitioning away from the hydrocarbons; however, we hope to see an increase in the footprint of alternative cleaner energy sources in the foreseeable future amid fossil fuel dominance. We use what we have to get to our desired destination. This is the reason that NNPC Limited has identified gas as a transition fuel and we are expanding our gas development and gas infrastructure across the country to increase energy accessibility.

“Today, Nigeria has about 209.5Trillion Cubic Feet of natural gas reserves with a potential upside of up to 600Trillion Cubic Feet, and this is an enormous resource that would drive cleaner and affordable energy vision. Other alternative energy sources such as solar and wind are faced with technology limitations. They are still not affordable and cannot meet the high energy demands of our industries, cities, and remote environments.

Kyari said the NNPCL plans to sustain and increase its aggressive gas development and gas transportation projects to achieve affordable and clean energy in line with the United Nations Sustainable Development Goal (SDG), Goal No. 7, as its strategic energy plan towards finding a balance for the energy trilemma.

Farouk Ahmed, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), represented by Mustapha Lamorde, the Executive Director, Health Safety Environment and Community (HSEC), highlighted the pressing energy challenges in Sub-Saharan Africa, including limited access to electricity and outdated infrastructure. He emphasized that as the transition progresses, there are significant opportunities to accelerate development across the gas value chain to pave the way for a sustainable energy future

Ahmed said millions of people in Sub-Saharan Africa, still live or are living without access to electricity while some only have access to very limited or unreliable electricity due to old and insufficient infrastructure, growing energy demand with few energy sources, and a vibrant young population among other challenges.

He said as an Authority, the ongoing Nigerian-Morroco gas pipeline and Trans-Saharan Gas pipeline are key stream when completed would place Nigeria as a major gas exporter to West Africa and Europe and build stronger international ties.

“As the transition evolves, there is an opportunity to accelerate development across the gas value chain providing a low carbon bridge to the future of sustainable energy,” he said.

The speakers at the NAICE conference agreed that as the energy sector evolves, collaboration, innovation, and strategic planning will be key to achieving a balanced energy trilemma of accessibility, affordability, and sustainability. By embracing efficiency improvements, clean energy sources, and responsible development practices, Nigeria and Africa can pave the way towards a more sustainable and prosperous energy future for all.


Upstream M&A Deals on the Rise, Return to Pre-COVID 19 Levels

Industry analyst Rystad of Norway says that global upstream merger and acquisition (M&A) deals rebounded to pre-COVID-19 levels in 2021, reaching a total of $181Billion, a 70% increase over 2020, The total deal value for 2021 was the highest in three years and almost reached the highs seen in 2017 and 2018 of $205Billion and $199Billion, respectively, Rystad Energy research indicates.

“Sellers faced difficulty finding buyers during the downturn in 2020, but that ended last year as big deals made a comeback on high commodity prices and a strengthening market.”, the report says. “Deals valued at more than $1Billion accounted for $126Billion, or 70%, of the global total. The share of $1Billion-plus deals rose almost three-fold, with 35 such deals announced in 2021 compared with just 13 in 2020.

Out of the $1Billion-plus deals, 13 were company acquisitions together valued at around $65Billion. Two large Australia-focused mergers – one between Santos and Oil Search and another between Woodside Petroleum and BHP – contributed about $22Billion, while other $1Billion-plus company acquisitions were focused on North American assets.

The share of resources sold in deals shifted in 2021, with gas accounting for 56% of all traded resources, a sizeable jump from the 43% share it had in 2020. Oil accounted for 31%, and natural gas liquids came in at 9%. This shift was primarily driven by the North American acquisitions in 2021 but was also helped by deal activity in other regions.

“With a strong potential deal pipeline, continuous pressure on companies to transform amid a global push to lower carbon emissions while simultaneously delivering profitable oil and gas production, and an average oil price of above $60 per barrel expected for 2022, the upstream M&A market is likely to stay active for the foreseeable future,” says Ilka Haarmann, senior analyst at Rystad Energy.

Breaking down the deals

Company acquisitions totaled $76Billion, around 42% of the global announced deal value in 2021, a drop in share compared with 2020 when purchases accounted for about 57% of the total deal values. The largest company acquisition by deal value was the merger of Cimarex Energy with Cabot Oil & Gas, which was valued at about $17Billion. Following suit with most other North American acquisitions announced in 2021, the deal agreement was signed in the year’s first half. Cimarex and Cabot did not have overlapping asset positions. The same applied for Appalachia-focused independent Southwestern Energy when it acquired Haynesville-focused Indigo Natural Resources for $2.7Billion and when Paloma Partners acquired Goodrich Petroleum for $480 million. Other US company acquisitions saw the merger consolidate the buyers’ existing portfolio positions.

The largest field acquisitions were Aker BP’s announcement to acquire Lundin Energy’s oil and gas portfolio, valued at about $14Billion, and ConocoPhillips’ acquisition of Shell’s Permian Basin position for $9.5Billion. Field acquisitions in the Permian totaled $19Billion in 2021, accounting for more than half of North American field and license acquisitions, which totaled $35Billion. Russian acquisitions amounted to $12Billion, while in Europe, they clocked in at around $24Billion.

Buyers and sellers

The only peer group with positive net inorganic resource growth in 2021 was public companies, while private players and national oil companies (NOC) divested more resources than they acquired on a net basis. Public companies increased their net resources by about 12Billion barrels of oil equivalent (BOE) through acquisitions last year. However, there are significant discrepancies between different company segments within this group. The top segment in terms of acquiring resources was public independents growing their positions mainly in North America. Among them were Coterra Energy (formed by the merger of Cimarex Energy with Cabot Oil & Gas), Southwestern Energy, EQT Corporation, Chesapeake Energy and ConocoPhillips. In total, public independents acquired around 34Billion BOE of resources in 2021 and sold approximately 21Billion BOE, resulting in a net resource growth of about 13Billion BOE for public independents.

Among public companies, the majors were the most aggressive in divesting resources in 2021, reducing their collective resources by about 5.5Billion BOE on a net basis. The largest inorganic resource reduction among majors was made by Shell, which divested nearly 3Billion BOE in North America, 500 million BOE in Africa and 200 million BOE in Asia. In total, Shell sold around 3.3Billion BOE net for more than $11Billion in net proceeds in 2021. ExxonMobil – the major with the second-largest inorganic resource reduction in 2021 – divested net resources of nearly 1Billion BOE for a net amount of about $3.8Billion, mainly through sales in Europe and Asia.

Public independents spent more than 75% of the segment’s acquisitions costs on acquiring assets from other public players, including majors, to which around 10% of the total amount spent on upstream acquisitions was paid. Public companies acquired assets worth $125Billion and sold assets for about $114Billion. Private companies in total acquired assets for $45Billion and sold assets for around $46Billion.

Looking ahead

The deal pipeline is robust, and the upstream M&A market looks set to continue to strengthen, with deals in the US likely to remain a crucial driver of the global deal value. Large sales in other regions may also materialize in 2022, particularly if majors continue to streamline their portfolios. While resources under development and production can receive high values in the current environment, buyers appear to be more cautious about discovered resources. Without larger changes in the macroeconomic environment, this discrepancy could persist. However, a further steady increase in valuations for producing and under development resources appears unlikely, judging by historical values.

For more analysis, insights and reports, clients and non-clients can apply for access to Rystad Energy’s Free Solutions and get a taste of our data and analytics universe.

Contacts

Ilka Haarmann

Senior Analyst, Upstream

Phone: +47 24 00 42 00

ilka.haarmann@rystadenergy.com

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