Ghana: Bulk Oil Distributors CEO Urges President Akufo-Addo To Lock Down Ghana Immediately To Prevent Spread Of COVID-19
The Chief Executive Officer of the Chamber of Bulk Oil Distributors (CBOD), Senyo Hosi is urging the President of the Republic of Ghana, Nana Akufo-Addo, to consider locking down the country immediately to prevent further spread of the coronavirus.
The West African nation has reported about 68 cases of the coronavirus with majority of them being imported.
Health experts are warning the situation could escalate.
The development compelled President Akufo-Addo to close the country’s land borders as well as the airspace to international flight on Sunday night.
Despite these actions, Senyo Hosi believed the country could have stopped the ‘importation’ of the virus if the President had closed the borders earlier than he did.
In an opinion piece, the CEO of CBOD, said: “We failed to shut the tap on COVID-19 by not shutting our borders early. The COVID-tap is now running among the citizenry through community spread. Just as in the analogy of the flooding tap, we need to shut the COVID tap now.
“This means just one thing…LOCK GHANA DOWN NOW! Whether in regions considered epicenters or nationwide, Ghana must be locked down now. Every day we fail to act escalates our situation, especially when we know we do not have adequate health infrastructures or resources to deal with the consequences. Will people suffer for it? Yes, but millions more will suffer more permanently if we do not lock down now. It is war! We must clearly define our strategy and choose our casualties. A 100 now or a million later?
“The true character and measure of leaders are not established in happy moments but in challenging moments when difficult decisions are made to steer the larger population to better times. This is time for leadership not electoral syllogism.
“Dear Mr President, please LOCK GHANA DOWN NOW before it locks us OUT! Ghana is its people and not just a geographic location.”
LockDownNow- 24.03.2020 (1)
Low Oil Prices Induces Cut-Backs Within The Oil And Gas Sector (Article)
Brent crude is now trading below the US$30 per barrel mark compared to US$68.60 trading price recorded on January 03, on fears the deadly Covid-19 will push the world into recession with an oversupply of the commodity.
Oil prices fell heavily at the open in Asia on Monday 23, 2020 after a trillion-dollar Senate proposal to help the Covid-19 coronavirus-hit American economy was defeated and death tolls soared across Europe and the US. US benchmark West Texas Intermediate (WTI) was down 2.5 percent at US$22 per barrel while Brent crude, the international benchmark, fell 4.9 percent to US$25 per barrel, according to AFP.
Since the beginning of the year, international oil prices have taken a significant hit, largely as a result of the spread of the Coronavirus, emanating from China and spreading to other parts of the world. The spread of the coronavirus has significantly slowed economic activity across the globe. Travel restrictions and flight cancellation across the world, as well as close of shops and production outlets in and around China, collapsed the demand for oil and fuels.
The situation was worsened by the lack of an OPEC+ agreement around production cuts early March, and the subsequent price war between Russia and Saudi Arabia. Russia’s quest to halt the rise in Shale oil production, refused to go along with OPEC’s proposal last week to cut production to halt the free fall of price. Since the meeting, Saudi Arabia the de facto leader of OPEC had retaliated against Russia by announcing a huge discount on their crude price and promising to flood the oil market with cheap oil.
At the close of trading on Friday March 6, crude oil prices had recorded over 30 percent drop from the beginning of the year, to sell at US$45.27 per barrel. And at the opening of trading on Monday March 9, Brent Crude tumbled by more than 30 percent following the lack of agreement on production cut. The fall is the largest one-day drop recorded since the start of the Gulf War in 1991.
Last Friday, the market gave back early gains by falling by more than 10 percent, even as the world’s richest nations poured unprecedented aid into the global economy to stop a coronavirus-driven recession and US President Donald Trump hinted of intervening in the price war between Saudi Arabia and Russia. US crude futures for April fell US$2.69, or 10.67 percent, to settle at US$22.53 per barrel. Brent crude futures fell US$1.25, or 4.4 percent, to trade at US$27.20 per barrel.
Cumulatively, WTI and Brent crudes have both collapsed about 40 percent in the past two weeks since the breakdown of talks between OPEC) and its allies, including Russia, leading Saudi Arabia to ramp up supply (Reuters, 2020).
Worst yet to Come
Reuters reported last Wednesday that Saudi Arabia will maintain oil supply at 12.3 million barrels per day (bpd) over the next few months, with exports expecting to rise to a record 10 million bpd from next month. The growing supply glut in oil markets could end up filling all storage tanks worldwide, potentially causing prices to drop even further.
Industry Analysts speaking to Reuters, suggest that such a development would overwhelm the already troubled oil industry, forcing production shutdowns. According to the news agency, storage facilities both on land and offshore are already filling up, and Saudi Arabia has not yet started to increase its deliveries of crude.
Rystad Energy’s head of oil markets, Bjornar Tonhaugen is of the view that oil prices could slide as low as US$10 per barrel if such a scenario should unfold. “We believe we have not seen the worst of the price rout yet, as the market will soon come to realize that it may be facing one of the largest supply surpluses in modern oil market history in April, Rystad Energy’s head of oil markets suggests.
Meanwhile Reuters reports that the glut is causing traders to offer their cargos at steep discounts in a desperate effort to find buyers. “There are no buyers, refiners in trouble, exporters in trouble, and producers in trouble. This is a disaster with no end in sight” an oil trader from the U.S. is reported as telling Reuters.
The Pain
According to Gaurav Sharma of Forbes, the oil and gas industry’s pain always follows an oil price slump. And that it can be excruciatingly painful when it comes to market permutations in a cyclical business facing a once-in-a-generation event. In recent memory, the industry has either faced a demand crisis like the global financial crisis of 2008-09 or a supply glut that surfaced in 2015-16. However, as the first quarter of 2020 nears its end, the industry is staring at simultaneous oversupply as well as a demand slump with many writing off much of 2020.
Too much oil for too few takers with too many producers vying for their attention is not just a crisis but an unmitigated disaster for exploration and production (E&P) companies and the oilfield services (OFS) firms that keep them going, Gaurav suggests.
Nathan Sheets, chief economist at PGIM Fixed Income, wrote in an email to CNBC pointing out the reality, that the oil and gas industry consists of many firms that will be vulnerable in the event of a sustained downturn in energy prices. That the fact remains that “their pockets simply aren’t as deep as those of major sovereigns like Russia and Saudi Arabia, who they compete with in the oil market, and the price they need to cover their costs is higher.”
While the drop in price has some benefits like reducing overall energy costs, raising in household and corporate real incomes, lowering inflation and reducing current account deficits for oil importing countries; it inflict pain on oil exploration, production, and services companies too (Baffes, Kose, Ohnsorge, & Stocker, 2015).
Cut-backs
In the estimation of Wood Mackenzie, the oil industry could see US$380 billion in cash-flow vanish if Brent averages US$35 per barrel this year, relative to US$60. Also Standard and Poor (S&P) which had previously expected US$60 this year, has slashed this price assumption for the year to US$40 per barrel.
Low oil price environment brings huge impact on operating performance of upstream oil and gas companies in the business of exploration and production (E&P), which typically reduces their ability to invest in additional capital investment (EIA, 2015). As lower oil prices reduces expected returns from future production, it equally decreases the incentives for upstream investment spending. As a result, new exploration and development projects may be delayed or canceled, dividend payments may be suspended, jobs may be lost, and reduced investments in producing fields can ultimately slow the growth in production (EIA 2015; Kaiser and Pulsipher 2006).
Already, the collapse in oil prices have seen some oil producers, especially in the United States and Canada announcing capital spending, dividend cuts, and job losses by the hour as many of their operations are unsustainable and deep in the red at US$30 a barrel for WTI Crude. Oil majors such as ExxonMobil, Chevron, Shell and BP are all evaluating their capital expenditure (capex) and operating expenditures (opex), with multi-billion dollar projects likely to be in limbo.
OilPrice.com reports that Apache Corporation has announced slashing its 2020 capital investment plan to US$1.0 billion-US$1.2 billion from a previous range of US$1.6 billion-US$1.9 billion. Murphy Oil Corporation, though is maintaining its commitment to dividend payment, has slashed its capital expenditure plan for 2020 by 35 percent. Chevron, Husk Energy, and many others are also looking at reviewing their investment plans after the price collapse.
Occidental Petroleum, weighed down by debt after its US$38 billion acquisition of Anadarko, announced last Tuesday that it’s slashing its quarterly dividend to 11 cents a share from 79 cents. It also said it plans to rein in spending this year by about 32 percent to about US$3.6 billion.
The cutters’ ranks are being swelled by independents like Apache Corporation, Devon Energy and Murphy, all of whom announced dramatic capital budget cuts of 30 percent or more, even before Big Oil got there. On the oil fields services (OFS) side, blue chip Halliburton has said it would furlough about 3,500 employees in Houston, oil and gas capital of the U.S., for 60 days. Driller Payzone Directional Services is halting operations, Liberty Oilfield Services said its executives would take a 20 percent pay cut and so the story goes, underpinned by a wider belief in the industry that the year 2020 is a lost cause (Bloomberg, 2020).
Tens of thousands of Texans are being laid off across the state in places like the Permian Basin shale fields in west Texas as companies shut down their drilling rigs, according to Ryan Sitton, a state oil and gas regulator. Drilling service company Canary LLC cut 43 workers last week. Recoil Oilfield Services laid off 50 workers after the water-transfer company lost all of its work with shale giant EOG Resources Inc. But the biggest blow so far came from Halliburton Co., the world’s dominant fracking-services provider, which said last week it would furlough 3,500 workers at its Houston headquarters.
The shrinking workforce is the direct result of a torrent of cuts in capital spending from U.S. explorers, some US$12.6 billion so far. All told, nearly two-thirds of the US$100 billion in global spending cuts could come in U.S. shale fields, according to Rystad Energy.
Written by Paa Kwasi Anamua Sakyi (aka Nana Amoasi VII), Institute for Energy Security (IES) ©2019
Email: [email protected]
The writer has over 23 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa
Occidental Petroleum Cuts CEO, Staff Pay To Combat Falling Oil Prices
U.S oil and gas firm, Occidental Petroleum Corp has announced plans to cut employee salaries by up to 30%.
The pay of Chief Executive Officer, Vicki Hollub, who championed the Anadarko acquisition and convinced Berkshire Hathaway chairman Warren Buffett to invest $10 billion in the deal, will fall 81%.
Salaries of other top executives will be reduced by an average of 68%, the memo said.
Some workers who joined the company from Anadarko and are protected by terms of the acquisition agreement, will also see their salaries lowered by 4.9%.
Occidental will cut the salaries for some U.S. employees who earn more than $76,000 a year by up to 30% effective April 1, according to the memo and employee comments on website thelayoff.com discussing the salary cuts.
The reductions follow two cuts to its 2020 capital budget and an 86% reduction in its shareholder payout.
After those cuts, the company said it would be able to cover its expenses with oil in the low-$30 a barrel range.
Global oil prices have dropped 60% since January as fuel demand has plunged because of the Coronavirus pandemic that threatens to cause a global recession.
Already, Saudi Arabia and Russia are planning to increase supply in a bid to grab market share.
Occidental has pared spending on production, cut its shareholder dividend, dismissed staff and sold assets to avoid being overwhelmed by the debt taken on to pay for its $38 billion acquisition of rival Anadarko Petroleum.
The deal was an ill-timed bet on rising oil prices that soured within months of the deal’s closing.
Crude oil LCOc1 traded at $27.64 a barrel Wednesday morning in Asia, below the level that occidental recently said it needs to cover expenses.
“During this unprecedented time impacting our industry, and the global economy, we’re taking aggressive actions to ensure the health of the company while protecting jobs,” company spokeswoman Melissa Schoeb said in a statement.
“We notified our employees of a number of measures we will be implementing, including compensation reductions, which will impact everyone at the company starting with the management team,” she said.
Source:www.energynewsafrica.com
Ghana: IPPs Chamber Takes Steps To Ensure Availability Of Power To Meet Demand As Covid -19 Forces People Home
The Chamber of Independent Power Producers, Distributors and Bulk Consumers (CiPDiB) says it has engaged with its fuel suppliers to ensure that they make fuel available to provide regular supply of power to meet surge in demand.
According to the Chamber, strategic arrangements have also been put in place to enable staff stay safe at post to keep the lights on.
“As a Chamber, we pledge our support to ensure a continuous and reliable supply of power for the comfort and security of everyone,” CEO of CiPDiB, Mr Elikplim Kwabla Apetorgbor said.
GRIDCo has been urging power producers to up their game by making sure that fuel is available to ensure continuous generation to meet expected increase in demand due to the outbreak of COVID-19, which has forced President Akufo-Addo to shut down schools.
The development, GRIDCo believes, would lead to surge in demand for power.
In a statement assuring Ghanaians of its readiness to ensure continuous power supply to feed the national grid, CiPDiB said: “We advise everyone to ensure efficient and sustainable use of the available power.”
Source: www.energynewsafrica.com
Shell Moves To Cut Costs Due To Coronavirus Outbreak
Oil major Shell has decided to reduce its operating costs by up to $4 billion in 2020 and cut its capital expenditure from $25 billion to $20 billion.
As the COVID-19 virus spreads across the world – seriously impacting people’s health, the way of life and global markets, Shell said on Monday it is taking decisive action to reinforce the financial strength and resilience of its business so that it is well-positioned for the eventual economic recovery.
“As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business,” said Ben van Beurden, Chief Executive Officer of Royal Dutch Shell.
“The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past.”
“In these very tough conditions, I am very proud of our staff and contractors across the world for maintaining their focus on safe and reliable operations while also ensuring their own health and welfare and that of their families, communities and our customers.”
In order to deliver sustainable cash flow generation, Shell is actively managing all its operational and financial levers – from focusing on maintaining safe and reliable operations each day to reducing capital spend and operating expenses.
According to the company, it is embarking on a series of operational and financial initiatives that are expected to result in reduction of underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels; reduction of cash capital expenditure to $20 billion or below for 2020 from a planned level of around $25 billion; and material reductions in working capital.
Together, these initiatives are expected to contribute $8 – 9 billion of free cash flow on a pre-tax basis. Shell is still committed to its divestment program of more than $10 billion of assets in 2019-20 but timing depends on market conditions.
The board of Royal Dutch Shell has decided not to continue with the next tranche of the share buyback program following the completion of the current share buyback tranche.
“We will continue to review the dynamically evolving business environment and are prepared to take further strategic decisions and consider changes to the overall financial framework as necessary,” Shell said.
Shell said that its liquidity remains strong, with around $20 billion in cash and cash equivalents, $10 billion of undrawn credit lines under the revolving credit facility and access to extensive commercial paper programs.
India Sees A Decline In Coal-Fired Power Project Pipeline
India’s coal-fired power project pipeline is rapidly shrinking with 46GW of cancellations in the last twelve months adding to over 600GW of cancellations this past decade.
This is according to a new briefing note published by the Institute for Energy Economics and Financial Analysis (IEEFA).
Author Kashish Shah, energy analyst with IEEFA, says the latest data from Global Energy Monitor (GEM) shows a heightened risk for non-performing assets in India’s thermal power sector.
“In the last 12 months to January 2020, 46GW of coal-fired power projects were formally or informally cancelled, leaving only 37GW under construction,” says Shah.
“Yet just one week ago the Environment Ministry presented data in parliament suggesting 62.2GW of coal-fired power plants were under construction.
“GEM’s data shows an additional 29GW of coal-fired power under various stages of pre-construction development, but they are not under construction.
“These proposed projects will most likely not see the light of day, if the last ten years are any indication.”
Shah says more than 600GW of similarly proposed projects have been cancelled since 2010.
“This has stark implications for bankers, lenders and developers feeling the pain of the ongoing stress in India’s thermal power sector,” says Shah.
“As the viability has gone, funding has dried up for new projects.”
The briefing note concludes that without subsidised support from government, in the form of concessional lending, waivers of even basic pollution controls and/or concessional tariffs, it is now unviable to build new non-mine mouth coal-fired projects in India.
The risk of these projects becoming non-performing assets is too high.
Total To Slash Over $2.5 Billion From E&P Business As Oil Crisis Bites
French oil major Total has revealed its plan to reduce its capital expenditure (capex) for 2020 by more than $3 billion and save about $800 million in operating costs compared to 2019.
Total will also suspend its buyback program.
According to Patrick Pouyanné, Chairman & CEO of Total, the decision is aimed to alleviate the consequences of the recent oil price plunge,
He recalled the resilience that the group’s teams demonstrated during the 2015-16 oil crisis as well as the two pillars of the group’s strategy which are the organic pre-dividend breakeven of less than $25/b and the low gearing to face this high volatility.
In a context of oil prices on the order of $30 per barrel, he announced an action plan to be implemented immediately. The plan was based on three axes.
The first one is organic capex cuts of more than $3 billion, ie. more than 20%, reducing 2020 net investments to less than $15 billion. These savings are mainly in the form of short-cycle flexible capex, which can be arbitrated contractually over a very short time period.
It is worth noting that, out of the planned $3.3 billion capex cut, about $2.5 billion will be cut in the Exploration & Production (E&P) business while $500 million will be cut in the Downstream sector.
The second axis is $800 million of savings in 2020 on operating costs compared to 2019, instead of the $300 million previously announced.
The final one is suspension of the buyback program – the company announced a $2 billion buyback for 2020 in a 60 $/b environment; it bought back $550 million in the first two months.
Ghana: GRIDCo Urges Power Generation Companies To Up Their Game To Meet Increase In Power Demand Due To COVID-19
The Director for System Operations at Ghana’s power transmission company, GRIDCo, Ing. Mark Baah says his outfit expects power generation companies to up their game by making more power available in order to meet expected increase in demand for power in the coming weeks.
The outbreak of global pandemic, Coronavirus (COVID-19) has so far infected 21 people in the West African nation.
President of the nation, H.E. Nana Akufo-Addo has shut down both public and private schools for the period in a bid to reduce the outbreak of the contagious Coronavirus.
The development, Ing. Mark Baah, believes would result in more people staying in the house, thus, leading to increase in consumption of power.
Speaking on an Accra-based Citi FM, Ing. Mark Baah said: “What we believe is going to happen is that there will be some increase in the average demand ….Normally there is less demand during the day and spikes up after people return home. But now, we expect that there will be some appreciable increase in demand.”
According to him, their forecast indicates that there is going to be a sharp increase in power given the weather condition as well as the outbreak of COVID-19 pandemic.
He, on this note, stressed the need for power generation companies to ensure that there is enough fuel to power their plants.
“We will continue to work with them and we expect that they will be doing more to ensure that fuel is available because we’re in a hot season,” Ing. Mark Baah said.
Source:www.energynewsafrica.com
Nigeria: Nigerians Consumed N2.64tn Petrol In 13 Months- NNPC
The Nigerian National Petroleum Corporation has revealed that it sold a total of 21.51 billion litres of petrol worth N2.64tn from December 2018 to December 2019.
The NNPC said the sale of white products from December 2018 to December 2019 by its subsidiary, the Petroleum Products Marketing Company, stood at 21.861 billion litres, with petrol accounting for 98.41 per cent.
It said revenues generated from the sale of white products in the 13-month period stood at N2.71tn, with petrol contributing about 97.56 per cent.
The NNPC has been the sole importer of petrol into the country for more than two years, after private oil marketers stopped importing the commodity due to crude price fluctuations among other issues.
The corporation reported 40 vandalised pipeline points in December 2019, representing about 41 per cent decrease from the 68 points vandalised in November.
The national oil firm said that out of the vandalised points, 10 failed to be welded, while none was ruptured.
It said Atlas Cove-Mosimi and Mosimi-Ibadan axis accounted for 35 per cent and 30 per cent of the breaks respectively, while other routes accounted for the remaining 35 per cent.
The NNPC added that it had stepped up collaboration with the local communities and other stakeholders to stem pipeline vandalism menace.
It said the PPMC distributed and sold 2.775 billion litres of white products in December, compared with 0.841billion litres in November.
The corporation said the products comprised 2.76 billion litres of petrol, 0.013 billion litres of diesel, and 0.003 billion litres of low pour fuel oil (LPFO).
It said N337.63bn was made from the sale of white products by the PPMC, compared to N105.62bn in November.
According to the statement, the national oil firm grew its trading surplus to N5.28bn in December 2019 from the N3.95bn in November.
The NNPC said the 34 per cent increase for the period resulted from improved performances by some of its entities both in the upstream and downstream sectors.
It said the performance was impacted positively by the reduced deficit posted by the NNPC corporate headquarters and adjustments to previously understated revenues by Integrated Data Services Limited and Duke Oil.
The corporation also reported a reduction in the costs of pipeline repairs/Right of Way maintenance and gas purchases by the Nigerian Pipeline and Storage Company and the Nigeria Gas Marketing Company respectively.
It said out of the 239.29 billion cubic feet of gas supplied in December, a total of 148.32bcf was commercialised, consisting of 34.7bcf and 113.54bcf for the domestic and export market respectively.
Ghana: Gov’t’s Projected Oil Revenue To Drop By $743m -ACEP
The Africa Centre for Energy Policy (ACEP), an energy think tank in the Republic of Ghana, West Africa, is predicting a quantum drop in the government’s projected oil revenue for the year 2020.
This is because of the significant drop in the global oil price, as a result of the novel Coronavirus pandemic.
Government of Ghana in its 2020 budget projected to receive $1.567 billion from oil revenues, anchored on a benchmark price of $62.61 per barrel.
However, the price on the international market, which was $66.25 per barrel at the start of the New Year, had fallen steeply to $26 per barrel as of March 21, 2020.
This fall in oil price is linked with the outbreak of COVID-19, which has affected global economic growth and demand for oil, thus creating excess oil supply.
Given the current global economic condition, effects of COVID-19, and Russia’s quest to sustain oil price below the marginal cost of shale production, oil price recovery is expected to be in the region of $45 per barrel by the end of 2020.
Therefore, the likely average oil price is estimated to be about $40 per barrel for the year.
At about 7:35am Monday, WTI was trading at US$22.87 per barrel while Brent was selling at US$28.46 per barrel.
According to ACEP, based on the average price prediction of $40 per barrel, the receivables from oil could drop to $743 million, a shortfall of about 53 percent. This has severe implications for the budget particularly physical infrastructure and debt servicing.
In the 2020 budget, Ghana’s infrastructure development programme is heavily dependent on oil revenues; about 80% of government’s domestic revenue for its capital budget was to be sourced from the Annual Budget Funding Amount (ABFA) (Figure 2).
Below is ACEP’s full statement
ACEP_Implications of low oil price on oil producing countries
Ghana: 63% Taxes And Margins Makes Big Drop In Fuel Prices Difficult – CBOD
The Chamber of Bulk Oil Distributors (CBOD) in the Republic of Ghana, is encouraging fuel consumers to be circumspect in their expectation of a reduction in fuel prices on the local market.
This is because changes in crude prices do not directly impact the supply chain costs, as government taxes and regulatory margins, as well as OMC & dealer margins, currently account for over 63% of current pump prices.
The public has been calling for a further reduction in oil prices to reflect prices on the international markets.
This call follows an announcement by some Oil Marketing Companies (OMCs) of a reduction in fuel prices at the pumps, which cumulatively amounted to two per cent.
Despite this, some civil society organisations (CSO) called for further reduction in the ex-pump prices for consumers to reflect the sustained decline in the global crude oil prices.
According to them, there ought to be a reduction of fuel prices between 10% and 32%, compared to the 2% offered to consumers over the past few days.
But the Chief Executive Officer of CBOD, Mr Senyo Hosi, explained that changes in crude prices do not directly impact the supply chain costs, as government tax and regulatory margins, as well as OMC & dealer margins, currently account for over 63% of current pump prices.
For the marketer’s margin, he said it represents the gross earnings due to an OMC for every litre sold as the dealer’s margin is the gross earnings due to a petroleum retailer operating under an OMC.
He explained that the margins are negotiated from time to time subject to major changes in key economic variables which are currently estimated at Ghp65.1/litre.
Mr Hosi said the crude prices impact pump prices only to the extent that it impacts the international market price of petroleum products.
Changes in crude prices, he stated, do not directly impact the FX rates.
He indicated that even though changes in crude affect international market prices of petroleum products, it does not impact it at the same rate.
“For example, crude dropped by 51% from $70 per crude barrel on January 6 to $34/ per crude barrel on March 11, 2020. Petrol and diesel, on the other hand, dropped by 47% and 40% respectively.
“Crude saw a six per cent drop in price between March 10 and 11, but diesel rather saw a 1% increase in price over the same period,” he explained.
He further explained that locally refined products should at worse be as competitive as imported products.
According to him, price fairness was subject to the refinery’s efficiency and the trading agency’s effectiveness.
A study of West African refineries, he disclosed, confirmed that Tema Oil Refinery (TOR) and other refineries operated at very high levels of inefficiency, which was being passed on to the consumer through pricing.
Source: Thefinder
South Sudan Postpones Licensing Round
South Sudan’s Ministry of Petroleum has postponed its first ever oil and gas licensing round which was set to kick off this month.
The decision follows the outbreak of COVID-19 pandemic, which has killed over 5000 people forcing nations to cancel several events in a bid to prevent the spread of the disease.
“Right now, we were in the middle of preparing for the first oil and gas licensing round. It was actually planned to be here by March but because of the coronavirus we could not even move,” Awow Daniel Chuang, Undersecretary in the Ministry of Petroleum told journalists in Juba.
Chuang along with Ministry of Petroleum officials, announced its bid to actively engage oil and gas companies focused on exploration, at two Africa focused events – Africa Oil & Power and the South Sudan Oil & Power 2019 (SSOP) – in Q4 2019.
Source:www.energynewsafrica.com
Analyzing The Impact Of Low Oil Price On Ghana’s Oil Production Growth (Article)
By: Paa Kwasi Anamua Sakyi
Oil as a lucrative commodity, oil has empowered many countries that produce it for export, in terms of improving the lives of the populace and increasing their political power among other nations (Abubakar et al. 2016; Akakpo, 2015). A 2007 report by the United Nations Conference on Trade and Development (UNCTAD), suggest that extractive activities (including oil exploration) can have a positive effect on development by creating jobs, encouraging business and providing vital infrastructure for remote communities such as roads, electricity, education and health.
Ghana was blessed with this all-important commodity a little over a decade ago when Kosmos Energy discovered oil in commercial quantities west of Cape Three Points, offshore. Oil production in commercial quantities commenced in 2010 with Tullow Oil as Operator, recording an annual output of 1,181,088 barrels in that particular year. Since then Ghana’s oil output has grown steadily to record an annual production output of 62,135,435.07 barrels for 2018, and a total of 315,021,308 barrel between early 2010 and end 2018.
Today, growth in the number of barrels produced remain key for Government, as it has become a vital source of revenue for the State, funding key sectors of the Ghanaian economy such as education, agriculture, and infrastructure development. Data from the Ministry of Finance (MoF) and the Bank of Ghana (BoG) shows that Ghana’s total petroleum revenues since the beginning of commercial production to end 2018 is in excess of US$4.9 billion.
When it comes to how much a country gets in the form of revenue from oil production, two variables remain key. One is production outputs from existing fields, and the other is the international price of the commodity. A fall in any of the two would automatically lead to a squeeze in the anticipated revenue for a country, and that of the international/integrated oil companies (IOCs) serving as partners of a particular block or field. But of the two, the price of the commodity plays a key influence, to the extent that it has a great bearing on oil production growth.
Recent Price Fall
Since the beginning of the year, international oil prices have taken a significant hit, largely as a result of the spread of the Coronavirus, emanating from China and spreading to other parts of the world. The spread of the coronavirus has significantly slowed economic activity across the globe. Travel restrictions and flight cancellation across the world, as well as close of shops and production outlets in and around China, has induced less demand for oil and fuels.
At the close of trading on Friday March 6, crude oil prices had recorded over 30 percent drop from the beginning of the year, to sell at US$45.27 per barrel, because of depressed demand for the commodity, following the coronavirus outbreak. Prices of fuels like Gasoline, Gasoil, and Jet fuels also had recorded a fall of more than 15 percent (on average terms) in the year, at the close of Friday trading.
At the opening of trading on Monday March 9, international benchmark Brent Crude tumbled by more than 30 percent, the largest one-day drop since the start of the Gulf War in 1991. The plunge in prices was driven by the acute demand dislocation and the lack of an OPEC+ agreement around production cuts. Russia’s quest to halt the rise in Shale oil production, refused to go along with OPEC’s proposal last week to cut production to halt the free fall of price. Since the meeting, Saudi Arabia the de facto leader of OPEC had retaliated against Russia by announcing a huge discount on their crude price and promising to flood the oil market with cheap oil ― clear sign of a price war.
Cumulatively, the fall in crude oil price since the beginning of the year is approximately 50 percent. While the drop in price has some benefits like reducing overall energy costs, raising in household and corporate real incomes, lowering inflation and reducing current account deficits for oil importing countries (Baffes, Kose, Ohnsorge, & Stocker, 2015); it has some negative consequences for oil exporting economies too.
On the global scale, the fall in oil prices is likely to lead to large demand for finances in near term of oil producing countries, and economic challenges (Lopez-Murphy and Villafuerte, 2010), recession (Hamilton, 1983), devaluation of currency and default on debt (Sardosky, 2001), drop in consumption of durable goods, delay in investment and reduction in capital expenditures (Kilian 2014; Bernanke 1983) et cetera.
In Ghana, the free fall in crude oil prices is likely to have a tremendous effect on government’s projected revenue, since the 2020 Budget had a benchmark price of US$58.66 per barrel, and expected petroleum receipt of close to US$1.2 billion.
If international oil price should stay around the US$30 per barrel mark till end year, government of Ghana is less likely to get half of its projected revenue for 2020. Also growth in oil production may also hit a smack, as already evident in Tullow’s revised production targets, due to poor financial performance.
Impact on Production Growth
In the estimation of Wood Mackenzie, the oil industry could see US$380 billion in cash-flow vanish if Brent averages US$35 per barrel this year, relative to US$60. Also Standard and Poor (S&P) which had previously expected US$60 this year, has slashed this price assumption for the year to US$40 per barrel.
Low oil price environment brings huge impact on operating performance of upstream oil and gas companies in the business of exploration and production (E&P), which typically reduces their ability to invest in additional capital investment (EIA, 2015). Compared to the midstream and downstream which invests in the business of refining and marketing of oil and gas; investing in the upstream segment tends to correlate with changes in oil prices, because prices are a significant factor in any project’s potential rate of return, according to the International Energy Agency (2015).
As lower oil prices reduces expected returns from future production, it equally decreases the incentives for upstream investment spending. As a result, new exploration and development projects may be delayed or canceled, and reduced investments in producing fields can ultimately slow the growth in production. Also, in a low oil price regime, investors and debt markets are likely to become more unwilling to fund further investment, which could lead to significant fall in the number of upstream projects (EIA 2015; Kaiser and Pulsipher 2006).
As shown below in the spending of some 23 selected international oil and natural gas expenditures between 2010 and 2015, spending on upstream investment totaling US$77 billion was 12 percent (US$10) lower in the fourth-quarter 2014 compared to the same period in 2013.
Already, the collapse in oil prices have seen some oil producers, especially in the United States and Canada announcing capital spending and dividend cuts by the hour as many of their operations are unsustainable and deep in the red at US$30 a barrel for WTI Crude.
OilPrice.com reports that Apache Corporation has announced slashing its 2020 capital investment plan to US$1.0 billion-US$1.2 billion from a previous range of US$1.6 billion-US$1.9 billion. Murphy Oil Corporation, though is maintaining its commitment to dividend payment, has slashed its capital expenditure plan for 2020 by 35 percent. Chevron, Husk Energy, and many others are also looking at reviewing their investment plans after the price collapse.
Ghana as an oil producing country, is not immune from these negative impacts around lower oil prices. Its oil production cost is north of US$30 a barrel, consisting of operating and maintenance (O&M) cost, and Reserve Development Amortization cost. It goes to suggest that at a projected oil revenue of US$58.66 per barrel, Ghana and partners in the respective fields makes roughly US$29 per barrel; in simple terms.
However at today’s oil price in the region of US$30 per barrel on the international oil market, the Ghanaian government and oil producing firms are making close to a net profit of US$0 per barrel; effectively at a break-even point. It means that oil at US$35 per barrel leaves insufficient margin for sustainable replacement of the commodity.
If prices should stay at US$30s oil producers including Tullow Oil, Springfield, AGM Petroleum, and Eni in the business of oil exploration and production may record losses, and bear cash-flow challenges. In such an instance, drilling and exploring for oil will become more challenging for these oil companies, and also for new entrants like ExxonMobil.
For existing producers like Tullow and Eni, poor operating and financial performance will render it difficult for them to proceed with additional or new capital investment to boost oil production. For new entrants such as AGM Petroleum, potential investors and debt markets may be reluctant to put cash forward, because of the increasing price volatility; thus impacting on production growth.
Government had projected crude oil output of 70.2 million barrels corresponding to 192,000 barrels per day for this year, and expect the country’s oil production output to more than double in the next 3 years. However, the expected growth in the upstream sector may not materialize if oil prices stays around the US$30 mark, or continue to tank.
Written by Paa Kwasi Anamua Sakyi (aka Nana Amoasi VII), Institute for Energy Security (IES) ©2019
Email: [email protected]
The writer has over 23 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa
On the global scale, the fall in oil prices is likely to lead to large demand for finances in near term of oil producing countries, and economic challenges (Lopez-Murphy and Villafuerte, 2010), recession (Hamilton, 1983), devaluation of currency and default on debt (Sardosky, 2001), drop in consumption of durable goods, delay in investment and reduction in capital expenditures (Kilian 2014; Bernanke 1983) et cetera.
In Ghana, the free fall in crude oil prices is likely to have a tremendous effect on government’s projected revenue, since the 2020 Budget had a benchmark price of US$58.66 per barrel, and expected petroleum receipt of close to US$1.2 billion.
If international oil price should stay around the US$30 per barrel mark till end year, government of Ghana is less likely to get half of its projected revenue for 2020. Also growth in oil production may also hit a smack, as already evident in Tullow’s revised production targets, due to poor financial performance.
Impact on Production Growth
In the estimation of Wood Mackenzie, the oil industry could see US$380 billion in cash-flow vanish if Brent averages US$35 per barrel this year, relative to US$60. Also Standard and Poor (S&P) which had previously expected US$60 this year, has slashed this price assumption for the year to US$40 per barrel.
Low oil price environment brings huge impact on operating performance of upstream oil and gas companies in the business of exploration and production (E&P), which typically reduces their ability to invest in additional capital investment (EIA, 2015). Compared to the midstream and downstream which invests in the business of refining and marketing of oil and gas; investing in the upstream segment tends to correlate with changes in oil prices, because prices are a significant factor in any project’s potential rate of return, according to the International Energy Agency (2015).
As lower oil prices reduces expected returns from future production, it equally decreases the incentives for upstream investment spending. As a result, new exploration and development projects may be delayed or canceled, and reduced investments in producing fields can ultimately slow the growth in production. Also, in a low oil price regime, investors and debt markets are likely to become more unwilling to fund further investment, which could lead to significant fall in the number of upstream projects (EIA 2015; Kaiser and Pulsipher 2006).
As shown below in the spending of some 23 selected international oil and natural gas expenditures between 2010 and 2015, spending on upstream investment totaling US$77 billion was 12 percent (US$10) lower in the fourth-quarter 2014 compared to the same period in 2013.
Already, the collapse in oil prices have seen some oil producers, especially in the United States and Canada announcing capital spending and dividend cuts by the hour as many of their operations are unsustainable and deep in the red at US$30 a barrel for WTI Crude.
OilPrice.com reports that Apache Corporation has announced slashing its 2020 capital investment plan to US$1.0 billion-US$1.2 billion from a previous range of US$1.6 billion-US$1.9 billion. Murphy Oil Corporation, though is maintaining its commitment to dividend payment, has slashed its capital expenditure plan for 2020 by 35 percent. Chevron, Husk Energy, and many others are also looking at reviewing their investment plans after the price collapse.
Ghana as an oil producing country, is not immune from these negative impacts around lower oil prices. Its oil production cost is north of US$30 a barrel, consisting of operating and maintenance (O&M) cost, and Reserve Development Amortization cost. It goes to suggest that at a projected oil revenue of US$58.66 per barrel, Ghana and partners in the respective fields makes roughly US$29 per barrel; in simple terms.
However at today’s oil price in the region of US$30 per barrel on the international oil market, the Ghanaian government and oil producing firms are making close to a net profit of US$0 per barrel; effectively at a break-even point. It means that oil at US$35 per barrel leaves insufficient margin for sustainable replacement of the commodity.
If prices should stay at US$30s oil producers including Tullow Oil, Springfield, AGM Petroleum, and Eni in the business of oil exploration and production may record losses, and bear cash-flow challenges. In such an instance, drilling and exploring for oil will become more challenging for these oil companies, and also for new entrants like ExxonMobil.
For existing producers like Tullow and Eni, poor operating and financial performance will render it difficult for them to proceed with additional or new capital investment to boost oil production. For new entrants such as AGM Petroleum, potential investors and debt markets may be reluctant to put cash forward, because of the increasing price volatility; thus impacting on production growth.
Government had projected crude oil output of 70.2 million barrels corresponding to 192,000 barrels per day for this year, and expect the country’s oil production output to more than double in the next 3 years. However, the expected growth in the upstream sector may not materialize if oil prices stays around the US$30 mark, or continue to tank.
Written by Paa Kwasi Anamua Sakyi (aka Nana Amoasi VII), Institute for Energy Security (IES) ©2019
Email: [email protected]
The writer has over 23 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa Australia: First World Solar Hydropower Plant To Be Constructed
The Australian Renewable Agency (ARENA) has announced $3 million in funding to RayGen Resources Pty Ltd (RayGen) to conduct a technical and commercial feasibility study for a 4MW ‘solar hydro’ power plant to be built in north-western Victoria.
The Melbourne based renewable energy startup RayGen is proposing to build a fully dispatchable renewable energy facility that will use their concentrated solar PV technology known as PV Ultra.
This technology will be combined with their Thermal Hydro technology to generate renewable energy and provide large scale energy storage.
The grid-scale power plant is proposed to be built in Carwarp near Mildura capable of providing 4MW of solar generation and 17 hours of storage.
The $6 million first phase will get the project to financial close and shovel ready for construction.
RayGen will be working with AGL and GHD on this initial phase which will include technical and commercial feasibility studies, commercial assessment, a connection agreement, offtake agreements, capital raising and a planning permit for a preferred site.
PV Ultra is a tower-mounted, concentrated solar PV technology that combines low-cost solar collection heliostats and high-efficiency solar conversion via PV cells, creating the ability to co-generate electricity and heat. The heat by-product is captured and used to boost the efficiency of the thermal storage element.
The thermal storage technology stores energy as a temperature difference between two water reservoirs. The heat generated from the PV Ultra is used to charge the hot reservoir, whilst the cold reservoir is cooled using an electric chiller supplied with electricity from PV Ultra and the grid.
The stored temperature difference will power an Organic Rankine Cycle engine to generate electricity with a round trip efficiency of 70%.
The size of the storage reservoirs are readily scalable and the water will be recycled and reused.
“With RayGen’s project we’re seeing homegrown innovation in solar PV now being used to find new solutions for dispatchable renewable energy. RayGen’s solution could complement other more traditional forms of storage such as grid-scale batteries and pumped hydro ,”ARENA CEO Darren Miller said.
He added that “with ARENA’s funding, RayGen is aiming to progress this project to be shovel ready by the end of this year and to prove its novel technology can be cost-competitive with batteries and pumped hydro.”
“While this solar and thermal storage plant works similarly to a solar farm combined with a pumped hydro facility, the advantage of RayGen’s approach is that it can be deployed at a smaller scale and at a much lower absolute cost,” he said.
RayGen CEO Richard Payne said: “Australia’s energy transition will require storage solutions that can store power cost-effectively for hours, days or weeks and be deployed at large scale around the world. RayGen has developed an innovative solar-plus-storage product that captures sunlight with mirrors and stores energy in water. Our technology provides firm renewable power at low cost, while conserving natural resources and our environment.
“RayGen’s flagship 4MW / 50MWh plant is expected to offer storage at a fraction of the cost of recent battery projects. The project is in a renewable energy zone that has limited capacity to support pumped hydro. We will also be supplying synchronous power to the grid where it is critically needed in the West Murray region.
“We would like to thank ARENA and our project partners in AGL and GHD for their support on this exciting project.”
“AGL’s support for this project is consistent with our commitment to providing sustainable, secure and affordable energy for our customers and helping shape a sustainable energy future for Australia,” said AGL Interim Executive General Manager Wholesale Markets Dominique Van Den Berg.
ARENA previously supported RayGen with a total of $8.67 million in funding to develop its PV Ultra technology and build the 1MW PV Ultra pilot project in Newbridge, Victoria. The pilot project has been operational for over two years powering a local mushroom farm.
RayGen is expected to reach financial close and commence construction on the plant this year, with the aim to have the facility commissioned in 2021.