OPEC+ Plan to Increase Oil Production by August Could Backfire –Rystad

of Petroleum Exporting Countries (OPEC) and its allies known as OPEC+ to increase production of oil from August could backfire as the upcoming partial return of curtailed oil production is set to create a new four-month supply glut of around 170 million barrels, a Rystad Energy analysis has revealed. According to the data consultancy firm, the analysis is based on the assumption that oil demand will not rebound as quickly as previously thought due to the persistent expansion of the Covid-19 pandemic in key markets, or what it called a mild second wave of the virus. It said: “After the first five months of 2020, which all registered excess global oil production compared to market demand, June was a month when global stocks saw some relief of 2.2 million barrels per day (bpd) of implied oil inventory draws. July, the last month of OPEC+’s record 9.7 million bpd output curtailment commitment, is also set to end with demand surprisingly exceeding supply by 1.9 million bpd.“But with the mild second wave already hitting several countries, we scale back our total liquids (crude, condensate, NGLs, other liquids, and refinery gains) demand recovery expectations in the short-term. Between August and October, total liquids demand levels will stay flat at around 90.5 million bpd, before rising to 92.9 million bpd in November and 94.6 million bpd in December. is set for a mini growth rally after reaching an astonishing low of 86.4 million bpd in June and an expected 88.2 million bpd in July. The planned output increase from the OPEC+ alliance and the reactivation of other global shut-in production is forecast to push supply to 91.2 million bpd in August, 92.5 million bpd in September, 92.9 million bpd in October and 93.3 million bpd in November, before closing at 93.4 million bpd in December.” Speaking on the analysis, the Rystad Energy’s Head of Oil Market Research, Bjornar Tonhaugen, was quoted as saying: “OPEC’s experiment to increase production from August could backfire as we are still nowhere near out of the woods yet in terms of oil demand. The overall liquids market will flip back into a mini-supply glut and a swing into deficit will not happen again until December 2020.” “We doubt that the market can take the additional production volumes from OPEC+ from August without negative consequences for oil prices, as the new glut will likely cancel some of the gains that led Brent to post Covid-19 highs of about $44 this month,“ Tonhaugen said. The company noted that, nevertheless, the total surplus of about 170 million oil barrels that will be created between August and November is only a fraction of the 1.4 billionbarrel stock overhang that was built up in the first five months of 2020, adding that this historic inventory build-up will still act as a soft brake on price increases when demand

The Plan by the Organisation

“Unlike demand, global oil supply

rebounds. “On the supply side, the US provided a much-needed supply-side buoy. We made major revisions to both our historical and future output projections. Based on preliminary reporting from most of the big oilproducing states and satellite data that give us insights into frac activity, we now believe that oil production (crude and condensate) reached a bottom of 10.4 million bpd in May 2020. “While oil production in the US will rise from now and until September, we have revised down our growth expectations due to low frac activity and natural decline.

Production is estimated to bounce back toward the 11 million to 11.2 million bpd range and then degrade towards 10.7 million bpd again in 4Q20 and 1Q21 as the current activity level is insufficient to offset the natural base decline.

“In addition, we revised down Iraqi oil production by about 200,000 bpd as the country makes good on its promise to make up for past missed OPEC+ compliance. Country-wide production will drop to 3.8 million bpd in Jul-20, we forecast, compared to our initial view that its output would struggle to get below the 4 million bpd barrier. We expect to see Iraq oil production capped below 4 million bpd through October but then will see output gradually increase again.

“Our balances suggest that OPEC+’ tapering plans to year-end may need to be put on hold if the goal is to sustain the oil price recovery. This can of course still happen, perhaps already in a month, as OPEC’s market monitoring committee will be reassessing the market on a monthly basis,” Rystad stated.

Shell Petroleum Development Company (SPDC) has stated that it recorded a significant reduction of breaches from wellheads and cleaned up more spill sites than ever before. The energy company made this known in their 2020 Shell Nigeria Briefing, while pointing that in 2019, SPDC JV reduced operational spills to their lowest levels. It reported seven operational spills in 2019, representing a 46.6 percent decrease over the previous year (when it recorded 15 of such spills).

Data available showed that in the year under review, theft and sabotage resulted in 156 spills. In 2018, the figure was 109. As part of the company’s policy, when a leak is identified, the team responds to contain any spilled oil and clean up. In 2019, it remediated 130 sites.

Shell noted that SPDC JV is working to eliminate spills from its operational activities, remediate past spills and prevent spills caused by crude oil theft, sabotage of pipelines or illegal oil refining. While SPDC operates to the same technical standards as other Shell companies globally, the company said illegal activities continue to inhibit a normal operating environment; noting that past spills from operational and illegal activities have been well documented, resulting in a clean-up programme and, where appropriate, compensation. According to the company, there is still much work to be done to get the company to its target of ‘Goal Zero’ in all spills (operational and third-party vandalism).

This can only be archived through a solid strategy, active partnerships, closer community engagements, bold security and new surveillance equipment, the company said it is steadily making progress in the areas of Improving performance; Preventing illegal activity; Response and investigation; Improving remediation; and Clean-up in Ogoniland. In the area of improving performance, Shell has a global ambition to achieve no harm and no leaks across all its operations.

This is known as Goal Zero. To reduce the number of operational spills in Nigeria, Shell said the SPDC JV is focused on implementing its ongoing work programme to appraise, maintain and replace key sections of pipelines and flow lines. In 2019, SPDC completed another 30 kilometres of new pipelines, bringing the total laid over the last eight years to around 1,330 kilometres.

“These efforts have significantly reduced operational spills over 100 kilograms to seven incidents and 28 tonnes of crude in 2019, compared to 15 incidents and 413 tonnes in 2018.

This represents a year-on-year reduction of more than 90 percent by volume, returning the joint venture to its trend of reducing operational spills. “Community engagement and the ongoing commitment from government agencies has also helped shorten response times to incidents. SPDC’s average time to complete the clean-up of free and/or residual spilled oil has halved from 13 days in 2016 to seven days in 2019.

C l o s e r e n g a g e m e n t w i t h communities has helped SPDC to access spill locations more quickly, meaning on average that joint investigations now commence within three days in 2019 compared to six days in 2016,” it stated. Shell Nigeria however, indicated that there still remains a challenge of preventing spills relating to sabotage and theft by third parties. These illegal activities accounted for 95 percent of the SPDC JV spill incidents in 2019, a similar proportion to previous years.

“In 2019, there were 156 theft and sabotage-related spills over 100 kilograms, up from 109 in 2018. This is due to factors such as increased availability of production facilities after a major export line repair in 2017, crude theft activities in an election year when government security agents can be reassigned, and the price of crude oil and refined products that is seen as an opportunity for illegal refining.

Despite preventive efforts, spilled volumes from illegal activities increased to around 2,000 tonnes of crude in 2019, compared with around 1,600 tonnes in 2018,” it said. On response and investigation, the company said upon identifying a leak, production is suspended, and efforts are made to contain any spilled oil. It said regular tests on emergency spill response procedures and capability is carried out in order to ensure staff and contractors can respond rapidly to an incident.

Additionally, in line with government regulations, a Joint Investigation Visit (JIV) team visits the spill site to establish the cause and volume of oil spilled. In the area of improving remediation, the SPDC JV has continued to identify and remediate legacy spill locations. In 2019 alone, 130 sites were remediated and 123 certified by Nigerian government regulators, compared to 116 certified and 45 remediated in 2018.

Also in 2019, SPDC and IUCN joined forces on the Niger Delta Biodiversity Technical Advisory Group, which includes representatives from the Nigerian Conservation Foundation and Wetlands International. The groups work together to monitor biodiversity recovery of remediated sites. Four sites have been assessed and selected as pilot sites for monitoring. These sites represent three ecosystems in the Niger Delta: land, seasonal swamp and swamp. On efforts made towards preventing illegal activities, Shell said the SPDC JV is committed to minimising the impact of third-party incidents and spills. The company works with government agencies, non-governmental organisations and communities to proactively minimise spills from illegal activity.

This work includes: Using simplified zonal pipeline maps to enhance targeted response to third-party interference and prevent incidents from occurring. Since 2017, SPDC has also been able to remove more than 523 illegal theft points. Illegal theft points are identified by daily inspections from the air and on the ground. The company has also implemented anti-theft protection mechanisms, such as anti-tamper locks and steel cages for wellheads. Around 301 cages have been installed so far and around 80 more are planned for 2020 that will all come with CCTV technology.

In 2019, three breaches of the cages were recorded out of 300 attempts. As a result, wellhead-related losses significantly dropped from about 30 kb/d in 2016 to less than 1 kb/d in 2019 across all SPDC operations. SPDC has also implemented several initiatives and partnerships to raise awareness of the negative impact of crude oil theft and illegal oil refining. Examples include community-based pipeline surveillance, radio jingles and the promotion of alternative livelihoods through Shell’s youth entrepreneurship programme, Shell LiveWIRE.

On Ogoniland Clean Up, Shell said SPDC JV is working with the relevant stakeholders to implement the 2011 United Nations Environmental Programme (UNEP) Report on Ogoniland. Over the last eight years, the company has taken action on all, and completed most, of the UNEP recommendations addressed specifically to it as operator of the joint venture. The UNEP report recommended the creation of an Ogoni Trust Fund with $1 billion capital to be co-funded by the Nigerian government, the SPDC JV and other operators in the area.

In its commitment to contributing its share of $900 million over five years to the fund, SPDC made $10 million available in 2017 to help set up the Hydrocarbon Pollution and Remediation Project (HYPREP), an agency established by the federal government to lead the cleanup effort. In 2018, the SPDC JV deposited a further $170 million into the escrow account to fund HYPREP’s activities, to complete its first-year contribution of $180 million. In 2019, the JV contributed the next tranche of $180 million, bringing the total contribution made to $360 million which represents the full amount due for the two years. SPDC has continued to work with the Bodo community and others to clean up areas affected by two operational spills in 2008. A memorandum of understanding granting SPDC access to begin the clean-up was signed in 2015 and two contractors were selected to conduct the clean-up, overseen by an independent project director. The clean-up consists of three phases; removal of free phase surface oil, remediation of soil and planting of mangroves and monitoring.

The removal of surface oil started in September 2017 and was completed in August 2018. Field remediation activities started in November 2019 following a contract procurement process to select remediation contractors. 800 community workers have been medically checked, assessed for their swimming ability to ensure they can safely respond to incidents in rivers and creeks, and trained to International Maritime Organisation oil spill response Levels one and two. Remediation is expected to take around 18 months. Shell said the clean-up will only be successful if the repeated re-contamination of cleaned-up sites from illegal thirdparty activity stops.

I n r e s p o n s e t o U N D P recommendations, SPDC has reassessed 15 SPDC JV sites mentioned in the UNEP report and remediated further where required with the sites certified by government regulators; completed an inventory and physical verification of assets for decommissioning and working with joint venture partners and the FGN to develop a decommissioning plan for these assets; completed a comprehensive review of its oil spill response and remediation techniques and made a number of improvements in line with industry best practices; collaborated with the Rivers State Government to deliver water to impacted communities and built water facilities, which are expected to be upgraded as part of HYPREP’s planned activities; and trained contractors on clean-up and remediation techniques and assigned specialist supervisors to a number of project sites to ensure effective oversight and compliance.

Th e d i l i g e n c e o f t h e M a n a g e m e n t o f t h e Nigerian National Petroleum Corporation (NNPC) in collaboration with officials of the Federal Government has saved Nigeria from losing a whooping sum of $125,000,000: 00 (One Hundred and Twenty-Five Million United States Dollars) to an alleged international crime syndicate led by Messrs. Ramirez and Mr Jose Salazar Tinajero and their company Samano Sa De Cv. Reports said that SAMANO had contacted officials of the Federal Government sometime in 2015 with information in respect of 48 Million Barrels of Nigerian Bonny Light Crude Oil allegedly stolen from Nigeria and stored in various ports and terminals in the People’s Republic of China. SAMANO offered to purchase the alleged stolen crude upon its recovery. Even though its claim was difficult to believe given the stern procedures underpinning crude oil handling and export operations, the Federal Government of Nigeria in collaboration with the Nigerian National Petroleum Corporation (NNPC) set out to verify these claims and requested for evidence to that effect, which was never provided by SOMANO. Notwithstanding the failure to provide evidence to support its claims, relevant officials of the Government were mandated to proceed to China to verify the claims of the existence of the said stolen Nigerian Crude Oil. The said delegation discovered that the SAMANO’s claim was

false and baseless. Consequently, t h e G o v e r n m e n t s e v e r e d communications with the syndicate.

Miffed by this, Messrs. Ramirez and Mr Jose Salazar Tinajero, acting as agents of SAMANO, resorted to the blackmail and intimidation of key officials of the Government and the NNPC threatening to make public the fact that the said 48 million barrels of stolen Nigerian Crude Oil in China had been recovered, sold and the proceeds therefrom looted by some government officials and the NNPC when it was aware that this was untrue. They also demanded $125,000,000:00 (One Hundred and Twenty-Five Million Dollars) from said government officials, which was conveniently and rightfully ignored.

Thereafter, NNPC reported this case of attempted blackmail to the Department of State Security and the Nigeria Police Force. They, upon investigation, discovered that SAMANO and its agents were international fraudsters. Mr Ramirez, for instance, was indicted by the U.S. District Court in the Southern District of Texas as the mastermind of a scheme leading to the loss of several millions of dollars through various mail and wire frauds between 2010 and 2013.In fact, there is a warrant for Mr Ramirez’s arrest and extradition to the United States to face criminal justice on account of the said fraud schemes. Mr. Jose Salazar Tinajero, a co-conspirator, has been in and out of jail in South America due to the involvement of SAMANO in elaborate smuggling and money laundering scams. Mr Ramirez is also facing two separate and unconnected criminal charges at the High Court of the Federal Capital Territory, Abuja in Charge No: FCT/ HC/CR/147/2016 and the Federal High Court, Lagos in Charge No: ID/2763/2016. Both charges were preferred against Mr Ramirez by the Economic and Financial Crimes Commission (EFCC) for economic and financial crimes.

The said Mr. Ramirez and his cohorts have since been charged to several courts in Nigeria for criminal offences ranging from fraud, forgery, extortion, blackmail, conspiracy, etc. The charge which relates to the attempt to fleece the Federal Government and NNPC is Charge No.: FCT/HC/BU/CR/134/2019 between the Federal Republic of Nigeria v. Marco Antonio Ramirez & 4 Others pending before the High Court of the Federal Capital Territory Abuja. But for the due diligence of the management of the NNPC, the Federal Government would have lost a whopping sum of $125,000,000:00 (One Hundred and Twenty-Five Million United States Dollars) to this international crime syndicate. The NNPC is currently consulting its lawyers Afe Babalola & Co. in a bid to take corresponding legal action(s) against the said syndicate for damages done to its reputation and its officials as a result of the false publications by the syndicate.

Hearty congratulations to the Executive Secretary Engr Simbi Wabote and His ever productive/patrotic team on the commissioning TODAY of magnificent 17-Storey NCDMB TOWER, the first of its kind in South-South Zone of Nigeria. We are excited to have proudly serviced the Edifice with Coleman ELECTRIC CABLES which is 100% made-in-Nigeria. Your leadership resilience in navigating challenges posed within Oil Sectors’ local content cannot be quantified. We are appreciative of your commitment! Congrats!

George Onafowokan, MD/CEO, COLEMAN WIRES & CABLES

Robert Kretschmer, MD, Kabelmetal Nigeria Plc