Shell Cuts Dividend For First Time Since World War II
Royal Dutch Shell has cut its dividend for the first time since World War Two following the collapse in global oil demand due to the coronavirus pandemic.
According to Reuters, the energy giant also suspended the next tranche of its share buyback programme.
The move came as it announced a 46% fall in first-quarter net income to $2.9bn (£2.3bn).
Chief Executive Officer for Shell, Ben van Beurden warned of “continued deterioration in the macroeconomic outlook”.
He said Shell was taking “further prudent steps to bolster our resilience” and “underpin the strength of our balance sheet”.
Shell is cutting its quarterly dividend by two-thirds, from 47 cents to 16 cents, starting in the first quarter of this year.
The company said it had also cut activity at its refining business by up to 40% in response to the sharp fall in demand for oil.
David Barclay, senior investment manager at Brewin Dolphin, said: “Royal Dutch Shell’s decision to cut its dividend for the first time since World War Two reflects the unprecedented economic impact of Covid-19.
“There was a great deal of speculation about what the energy company would do leading up to these results and the market was braced for bad news.
“On the face of it, the dividend cut and cancellation of share buybacks may be seen by some shareholders as a negative move in the short term.
However, looking further ahead it could well prove to be the right step, as Shell looks to strengthen its financial position and cut costs during a very difficult time.”
Ghana: Unemployed Man Before Court For Stealing 11 ECG Prepaid Meters
An unemployed man has been charged by a Circuit Court in Accra, capital of Ghana, West Africa, for allegedly stealing 11 prepaid meters valued at $2,600 belonging to power distribution company, ECG, at Nungua, a suburb of Accra.
The court presided over by Her Honour, Mrs. Afia Owusua Appiah charged the accused person with stealing contrary to section 124 of Act 29/60.
According to report filed by Kasapafmonline.com, the accused person, Edward Abeiku, who is a resident of Nungua, however pleaded not guilty to the charge of stealing pressed against him by the court.
The brief facts of the case as presented to the court by prosecutor Inspector Samuel Ahiabor were that, the complainant in the case is Mr Samuel Korley, the Nungua District Technical officer of ECG while the accused person, is unemployed and a resident of Nungua.
Inspector Ahiabor told the court that, the Kpeshie Divisional Police Command has been receiving rampant complaints of theft of ECG prepaid meters within Nungua and its environs.
The command, he said “has been informing the District Office of ECG about the occurrence and both offices have been on the lookout for the perpetrators of the crime.
He told the court that, “on April 22, 2020, the command received information from a witness Michael Afotey that the accused person and two others (yet to be arrested) have stolen some electricity meters and kept them in a room.
According to him, the “Police proceeded to the said location where the accused person was arrested with one of the stolen ECG prepaid meters in his hands.
“A search conducted in the room of his accomplice, Robert Annang Adu close to the scene of the arrest revealed four pieces of prepaid meters belonging to ECG.
“When the accused person’s room was subjected to a search, another three faced ECG prepaid meter was retrieved.”
The prosecutor told the court that, “the accused mentioned Robert Annang Adu and Abeiku as his accomplices.”
“Police investigation revealed that from January to early April the accused person and his accomplices have stolen several ECG prepaid meters officially assigned and installed for some applicants with Nungua township and re-assigned them to unsuspecting members of the community at the cost of GHc600 per meter.
According to him, the complainant, Mr Samuel Korley, identified the prepaid as properties of ECG which were among 60 pieces of meters reported stolen.
“During investigation, the accused further led police and officials of ECG through Nungua township and pointed out additional five pieces of ECG prepaid meters which were among numerous meters the group have stolen from victims and re-installed them for the unsuspecting customers.
“The meters were disconnected and removed. In all 11 pieces of stolen ECG prepaid meters were retrieved during investigation,” the prosecutor informed the court.
The accused person, he said, “was charged with the offence and put before the court while efforts are being made to arrest the two accomplices.
However, the court granted him bail in the sum of GHc60, 000.
In addition to the bail conditions, he is to provide three persons to stand as sureties, one of them the court said must be a public servant earning not less than GHc2, 500 per month.
The case has been adjourned to June 15, 2020.
Source: www.energynewsafrica.com
Maersk Drilling To Sack 300 Workers In North Sea
Denmark based-rig operator, Maersk Drilling says it is taking steps to reduce its offshore crew pool as it stacks North Sea rigs in light of the COVID-19 pandemic and crash in oil prices.
The company said that due the commercial outlook for offshore drilling it expects around 250 to 300 redundancies in the North Sea crew pool in Denmark, Norway and the UK.
It is currently in the process of initiating consultations with trade unions and employee representatives.
“Though it’s standard practice in our industry to adjust our workforce to activity levels, it never feels right to say goodbye to good colleagues, especially when so many have walked the extra mile to keep operations running in these very difficult circumstances.
However, it’s our responsibility to safeguard our business and we are now taking steps to maintain competitiveness in the challenging market environment,” CEO Jørn Madsen said.
Maersk Drilling said some tenders and projects are being delayed or cancelled.
On April 16, the company announced it received notice of early termination for two drilling contracts involving the semi-submersible Maersk Developer and jack-up rig Maersk Reacher.
However, due to early termination fees, the financial impact of the contract terminations on 2020 profitability is expected to be minimal, the company said.
Source:www.energynewsafrica.com
Tanzanian Healthcare Centres To Receive Free Electricity Services
JUMEME, a mini-grid operator, has launched a COVID-19 Relief Programme to support the Tanzanian healthcare centres in the fight against the COVID-19 pandemic.
With this programme, JUMEME will use its local solar-hybrid mini-grids to provide 10 healthcare facilities in the Lake Victoria Islands with free electricity services for the coming three months.
As free and reliable electricity supply will help keep operations run smoothly, it will also free up much needed financial resources to better prepare the local healthcare facilities to fight COVID-19.
In addition to its 12 solar-hybrid mini-grids already in operation in the Lake Victoria area, JUMEME is also finalizing the implementation of 11 mini-grids on the shores of Lake Tanganyika, in the Northwest of Tanzania, which will connect 10 more health centres once operating.
JUMEME intends to extend its relief program to this area to support their local health centres as soon as the new project is completed.
Dr. Kole, Chief Physician at the Bwisya Hospital said: ”We are grateful to JUMEME for the (electrification) services they offer to Bwisya Hospital for 24 hours a day without failure. We also appreciate the availability of electricity which enables us to conduct clinical procedures, surgery, and other essential health services to the people of Ukara island.’’
Health centres are common in Tanzania’s remote rural areas. Patients rely on these facilities to receive first aid and treatments for common infections, before being referred to larger, better equipped facilities if needed.
In JUMEME’s project areas, which were selected for their remote, off-grid location, only one healthcare facility can be deemed a hospital, which is located in Bwisya on the island Ukara.
These smaller facilities are especially vulnerable, as they receive less funding than larger hospitals.
NYSE To Delist Diamond Shares After Bankruptcy Filing
Offshore drilling contractor, Diamond Offshore Drilling has received a delisting notice from the New York Stock Exchange (NYSE) after filing for Chapter 11 bankruptcy protection.
According to Diamond Drilling, it received notification from NYSE Regulation that it has determined to start proceedings to delist the company’s shares of common stock.
NYSE Regulation determined that the company was no longer suitable for listing after the company’s disclosure that it and select subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.
Diamond said it does not presently anticipate exercising its right to appeal NYSE Regulation’s delisting determination.
The company added that it expects that its common stock will be quoted on the OTC Pink markets.
NYSE listing for several other offshore drilling contractors is at risk due to the difficult market situation.
Source:www.energynewsafrica.com
Venezuela: Maduro Appoints One Of America’s Most Wanted As New Oil Minister
Venezuelan government is looking to reverse the radical decline in its oil industry with two new appointments–one which involves putting a fugitive drug trafficker at the helm of its troubled oil industry.
Tareck El Aissami, previously Minister of Industries and National Production–and a current member of America’s 10 Most Wanted—will replace Manuel Quevedo as Oil Minister. The second appointment places the cousin of late president Hugo Chavez at the helm of state oil company PDVSA.
El Aissami was recently added to the United States’ list of 10 most wanted fugitives on charges of drug-trafficking after three years ago he was sanctioned for drug trafficking. He was later accused of violating the sanctions by receiving payments for facilitating the transportation of drugs, Reuters reports.
Venezuela has been fighting hyperinflation and persistent basic goods shortages as well as inexorably declining oil production brought about by a combination of under investment, mismanagement, and U.S. sanctions.
From more than 2 million bpd, its output has fallen to just 700,000 bpd.
It may fall further now that the United States is pressuring Chevron and Halliburton into leaving the country. The U.S. Office of Foreign Asset Control tightened Venezuelan oil sanctions earlier this month that pretty much prohibit both U.S. companies from doing business in the country. Chevron’s joint venture with PDVSA produces about 200,000 bpd of heavy crude.
In February, Nicholas Maduro declared an energy emergency that also aimed to overhaul the country’s struggling oil industry. It seems it hasn’t worked so far, with gasoline shortages worsening so much that the government began to shut down fuel stations across the country.
Venezuela produces little gasoline because its refinery network is in the same state of disrepair as its oil industry as a whole. It also imports little after imports from the United States stopped. Venezuela was the one that suspended imports from the U.S. amid the escalating row between the two.
Meanwhile, Venezuelan oil has fallen to below $10 per barrel. This is the lowest in more than twenty years.
Source: Oilprice.com
Ghana: Covid-19: Senyo Hosi Urges Businesses To Reposition Themselves For Future Eventualities
The Chief Executive Officer of the Bulk Oil Distributors (CBOD) in the Republic of Ghana, Senyo Hosi is urging businesses in the West African nation to learn from the impact of coronavirus pandemic and position themselves and take advantage of future eventualities.
According to him, if businesses in the West African nation had been well prepared, they could have taken advantage of the demand for hand sanitisers in the United States and become exporter of the product and raked in foreign exchange.
The outbreak of the coronavirus, which has killed over 200,000,000 globally with the U.S, alone, recording 58,900 deaths, has resulted in the high demand for hand sanitisers.
The situation has compelled the U.S oil and gas firm, ExxonMobil to configure its refinery at Louisiana to start producing sanitisers for donation to fight the Covid-19.
Contributing to a discussion on the impact of the coronavirus on businesses and opportunities coronavirus presents, on ‘AM Show’ on Joy News Channel, in Ghana, Senyo Hosi noted that countries like Vietnam and Thailand have established themselves as rice exporters while India is noted for medicine export globally.
He, however, said the same cannot be said for Ghana and many other African countries.
He noted that Ghana is heavily dependent on imports and called for a paradigm shift by revolutionising the agricultural sector so that some of the imported products can be home grown.
Senyo Hosi was of the firm believe that Ghana, and for that matter, Africa needs to start producing more things themselves instead of depending on imports.
“Take sanitisers for example: A lot of demand is coming from the U.S. If we had positioned ourselves and possibly shut our borders earlier, we would have become global exporter of sanitisers and other PPE,” he said.
He underscored the need for the government to make sure that companies which have been supported to produce sanitisers and other PPE due to the outbreak of coronavirus become sustainable and not allowed to fade away after containment of the situation.
“Are we going to be able to produce personal protective equipment (PPE) like we currently have some companies doing? What sustainable interventions are we going to have from government to make sure that these people will not just go beyond this immediate coronavirus problem and probably have these business thrive over 30 years or more?
Source: www.energynewsafrica.com
Ghana: Energy Minister Suggests Ways To Deal With Fall In Future Oil Prices
Ghana’s Minister for Energy, John- Peter Amewu has suggested that the country should build what he calls a sliding skill behaviour into its fiscal regime to ward-off shocks of low oil prices in future.
According to him, without that, the International Oil Companies (IOCs) and governments would continue to suffer anytime oil prices fall.
Amewu made this suggestion in an exclusive interview with energynewsafrica.com.
Oil prices on the international market have plummeted due to the outbreak of Coronavirus, which has slowed demand for the commodity.
Crude oil prices went as low as $11.78 (WTI) and $17.73 (Brent) on April 22, 2020.
“So, maybe, this is a lesson for us to begin to look into a sliding skill into our fiscal regime to address this fluctuating oil price,” Mr Amewu indicated.
The Energy Minister noted that Covid-19 has had a negative effect on all global economies and Ghana is not an exception.
Touching on Ghana’s upstream sector, he said companies like Aker Energy has postponed the development of PECAN project because most of the expatriates they need to bring cannot come because the country’s land and air borders have been shut because of the outbreak of coronavirus.
“Covid-19, as you rightly put, has had a lot of impact on some of these companies so yes, it is true they postponed their development activities but that doesn’t mean they will not come back when the situation calms. Most of these companies will come back,” he explained.
Commenting on how the government intends to sail through this Covid-19 period, Mr Amewu noted that it has thrown the country’s budget out of gear, but he trusted the Finance Minister to undertake financial re-engineering to cushion the Ghanaian economy in this trying times.
Addressing whether Ghana would engage oil exploration companies in this Covid period, he said low price could be the bargaining power of these companies so, the government would wait for a stable price period to engage them in future.
“Government’s budget has been hit extensively in terms of the revenue… billions of dollars have been lost as a result of the fall in oil price but the Finance Minister is on top of the game, he is trying to restrategise and relook at some of our expenses to expand and see where he can get some extra sources of funding to address some of these problems. So I think we are on course as a country,” he assured.
Source: www.energynewsafrica.com
African Energy Chamber Calls On Bank Of Central African States To Relax Forex Rules
The African Energy Chamber has joined oil industry stakeholders in calling on the Bank of Central African States (BEAC) to relax its currency controls rules adopted in June 2019.
Last year, the BEAC introduced new rules controlling the flows of currency in Central Africa in a bid to promote financial transparency and ensure that oil revenues stay within local economies and local banks. While the Chamber continues to support sound and transparent revenue management and distribution across the oil & gas industry, these specific rules have created a very unattractive environment for foreign investors seeking to invest in CFA union states.
The new rules notably state that all foreign exchange transfers over $1,680 be vetted for approval by the bank, and that all export proceeds above $8,400 be repatriated in 150 days to a local bank account. Unfortunately, such controls are causing transaction delays and preventing foreign investors to repatriate proceeds from their investment, which is a key condition of any attractive investment jurisdiction. With such controls and rules in place, CEMAC will suffer and becomes less attractive to credible investors.
H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons of Equatorial Guinea, had quickly reacted and called the measures deadly for the local oil & gas industry, stating that they could destroy economies and make it impossible to attract investments. Local and regional entrepreneurs will suffer and the oil sector will see a decline in investment.
Given the current scenario of historic low oil prices and COVID-19 pandemic, the Chamber is urgently calling on the BEAC to listen to industry voices and concerns and relax such currency controls to maintain the region’s attractiveness as an investment destination.
“The FX Regulations adopted in June 2019 make it very difficult for our companies to compete and create employment, and render our business environment very unattractive for foreign investors. Given the worsening of the region’s economic outlook in light of the COVID-19, the industry needs urgent action on the relaxing of these FX Regulations,” declared H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons.
Following the release of Africa’s Energy Commonsense Agenda this week, the Chamber believes that reforming business environments across Africa should be a priority for every regulator and all central banks, in order to ensure swift economic recovery and make the continent more competitive on the global stage.
The African Energy Chamber’s Call to Action was released this week and is available to download for free on www.EnergyChamber.org. It details 10 measures that form part of a Commonsense Energy Agenda for Africa to recover from the current crisis.
Source: www.energynewsafrica.com
How Africa’s Oil & Gas Industry Can Bounce Back From COVID-19 Pandemic And Oil Price War (Article)
The double crisis of the COVID-19 pandemic and the collapse in oil prices is taking a toll on African economies and the African energy industry. An unstable and precarious oil prices environment has resulted in substantial cuts in state budgets and public spending, in losses of contracts and hundreds of thousands of jobs put at risk. Because bouncing back from this historic crisis will require strict and bold government action, the African Energy Chamber has released today its Call to Action, detailing 10 measures that form a commonsense energy agenda for Africa, which is now accessible to download for free at www.EnergyChamber.org.
The impacts of the current crisis are wide and affecting both Africa’s most promising exploration prospects, but also its multi-billion-dollar landmark projects such as BP and Kosmos Energy’s Greater Tortue Ahmeyim (GTA) LNG project in Mauritania and Senegal or ExxonMobil and Eni’s $30bn Rovuma LNG project in Mozambique.
Oil projects are suffering even more. In Ghana, the development of the Pecan Field has been thrown into very uncertain waters. Aker Energy cancelled its letter of intent sent to Yinson Holding this year to charter, operate and maintain the Pecan FPSO, set to be Ghana’s next big oil offshore development. Woodside Energy’s Sangomar Offshore Oil Project, Senegal’s very first oil venture that was sanctioned early this year, will be facing financing delays.
FID on Shell’s Bonga South West Aparo project in Nigeria, for which the invitation to tender was released to contractors early last year, could also not see FID this year. Delays in the execution or sanctioning of these projects will severely impact African economies whose local goods and services were set to benefit from billions of dollars of subcontracting opportunities.
“Our commonsense approach advocates for measures that will support the continuity of business operations and future sector growth. The oil and gas industry will only work for Africans when we set fair policies and treat oil and gas companies as partners who drive our progress,”NJ Ayuk, Executive Chairman at the African Energy Chamber noted.
“As the voice of the energy industry, we will continue to work with the public and the private sector and other stakeholders to revitalize the African oil and sector by putting Africans back to work,” Ayuk added.
While the immediate impact on the continent’s biggest oil & gas project is already being felt, a much bigger one will result from the deferral or cancelling of drilling plans. Across oil & gas basins, drilling projects are being put back on the shelves or terminated. It is the case of Valaris’ drilling activities for Chevron in Angola, of BW Energy’s drilling operations on the Marin Dussafu Permit in Gabon, of the much-awaited exploratory drilling by FAR in The Gambia, of early termination of drilling works of Maersk in Ghana’s Jubilee and TEN Fields, or of Tower Resources’ force majeure on the Thali PSC in Cameroon. No country is sparred, and such delays will further defer discoveries of new fields, and development drilling to ramp up Africa’s daily output.
Since the beginning of the COVID-19 pandemic and its subsequent effect on oil demand and prices, the African Energy Chamber has been leading the dialogue between the public and the private sector on advocating for measures to support our industry and its jobs. While the Chamber believes that market forces need to determine the industry’s future and advocates for limited government across the industry, the time calls for urgent actions. We cannot let our companies and industry collapse for the fear of loosing jobs and investments that would sustain our economies for decades to come. It is worth bearing in mind, that activity in and income from Africa’s energy sector generates significant amount of demand and services from other non-oil and gas sectors of the economy.
Key measures amongst the Africa’s Commonsense Energy Agenda released today are the extension of PSCs and work program adjustments to boost exploration and ensure the resumption of drilling activities. While exploration is a major part of our Call to Action, the Chamber also strongly advocates for tax relief on services companies, reforms of upstream fiscal regimes, banking and financial support, regional content development, incentives to infrastructure projects, and bold actions on removing fuel subsidies.
The African Energy Chamber will continue to call on governments, regulators and private companies to work together on finding the right solutions that work for their country and operations. We have the tools in our hands to quickly open new markets for our oil and gas businesses and create new jobs for our continent.
Source: www.energynewsafrica.com
Vaalco Energy Given Delisting Warning By NYSE
U.S-based oil and gas company, Vaalco Energy has received a continued listing warning from the New York Stock Exchange (NYSE), giving Vaalco until the end of the year to regain compliance.
According to Vaalco, the company was notified by the NYSE that the price of the company’s common stock had fallen below the NYSE’s continued listing standards.
The NYSE requires that the average closing price of a listed company’s common stock should not be less than $1 per share for a period of over 30 consecutive trading days.
Under the NYSE rules, Vaalco can regain compliance if on the last trading day in any calendar month the common stock has a closing price of at least $1 per share and an average closing price of at least $1 per share over the 30 consecutive trading-day period ending on the last trading day of such month.
As required by the NYSE, the company plans to notify the NYSE of its intent to cure the deficiency and restore its compliance with the NYSE continued listing standards.
The company said it was committed to working with the NYSE to regain compliance and maintain the listing of its common stock.
The company has until 1 January 2021 to regain compliance with the NYSE’s continued listing standards under recently adopted rules by the NYSE that permit listed companies additional time to regain compliance due to the current economic environment.
Another U.S. oil and gas company has also recently received the NYSE listing warning.
In addition, the NYSE listing of several offshore drilling contractors is also at risk, including Noble Corporation, Seadrill, Pacific Drilling, and Valaris.
Source:www.energynewsafrica.com
ADNOC, ADPower Launch Joint Tender For Middle East Sub-Sea Power Transmission Network
The Abu Dhabi National Oil Company, ADNOC, and Abu Dhabi Power Corporation, ADPower, have announced the issuance of a joint tender for a first-of-its-kind project in the Middle East & North Africa (MENA) region.
The joint tender sets out to develop and operate the region’s first high-voltage, direct current, HVDC, sub-sea transmission system, that will connect ADNOC’s offshore production facilities to ADPower’s onshore electricity grid using state-of-the-art technology, ADNOC said in a statement.
This innovative project, initiated by ADNOC in line with its continued objective to drive efficiencies and bolster resilience, brings together two vital UAE entities.
Together, ADNOC and ADPower will deliver valuable long-term synergies in national infrastructure and jointly attract international partners to Abu Dhabi. In addition, this milestone project demonstrates the two entities’ commitment to continuously drive responsible and sustained investment and value creation for Abu Dhabi and the UAE, and support the ongoing development of the national economy in this complex and challenging period.
The project is expected to reduce the carbon footprint of ADNOC’s offshore facilities by up to 30 percent through ADPower’s efficient onshore power production. It also offers power supply cost optimisation potential for ADNOC’s offshore facilities and will drive operational efficiency and system reliability by replacing the existing offshore localised gas turbine generators with diverse, more efficient and environmentally sustainable sources of energy, including renewable and nuclear power.
The project also offers potential for ADNOC to more effectively utilise its rich gas – currently used to power the offshore facilities – for higher-value purposes, allowing ADNOC to generate additional revenue for ADNOC and Abu Dhabi.
Commenting on the tender issuance, Yaser Saeed Al Mazrouei, ADNOC Upstream Executive Director, said, “We are very pleased to partner with ADPower on this innovative project that is a logical result of ADNOC’s transformation journey, directly supporting our value creation and sustainability strategy as well as our objective to remain one of the world’s lowest-cost oil producers and lowest-carbon emitters in our industry.
“This project will meet our future offshore power needs, even as our fields mature, using diverse and sustainable sources. It will lower ADNOC and the UAE’s carbon footprint, whilst at the same time enabling ADNOC to utilise the natural gas currently used to power our offshore facilities for higher-value purposes. Equally, the project will deliver operational expenditure reductions in the long run as well as lasting strategic benefits as we continue to drive sustainable value and responsible investment opportunities that stimulate economic growth for Abu Dhabi and the UAE in the current market environment.”
Omar Alhashmi, Executive Director Asset Management at ADPower, said, “As we continue to accelerate the transformation of Abu Dhabi’s water and electricity sector, ADPower is pleased to partner with ADNOC on this important, innovative, large-scale effort. Working together, we are reinforcing Abu Dhabi’s global position as we implement this first-of-a-kind mega project that will not only create synergy between two critical industries, but drive the Emirate’s economic growth through long-term value creation.”
Requests for proposal have been sent to international companies that have the requisite experience to partner with ADNOC and ADPower on this important infrastructure project for Abu Dhabi. The transmission system will comprise two independent sub-sea HVDC transmission links and converter stations that will connect to ADPower’s onshore electricity grid – operated by its subsidiary, Abu Dhabi Transmission and Despatch Company, TRANSCO – and provide a total installed capacity of 3,200 megawatts. Commercial operation is expected in 2025.
This significant capital project will be funded through a special purpose vehicle jointly owned by ADNOC (30 percent stake), ADPower (30 percent stake) and the selected developers and investors (40 percent stake). The project is to be executed on a build, own, operate and transfer, BOOT, basis. The successful bidders, alongside ADNOC and ADPower, will develop and operate the transmission system, with the full project being returned to ADNOC at the end of the transmission agreement.
Drilling Through A Broken Oil Market, Repercussions For Our Local Market (Article)
By: Raymond Nuworkpo
International Brent Crude plummeted momentarily on Tuesday, 21st April, the lowest since 21yrs ago but recovers a day after to hover around $20 a barrel. As the novel Coronavirus lockdown grind down many facets of our lives i.e. a grounded airline industry, a drowning hospitality sector, a quandary health industry, a crumpled supply chain industry, etc, the energy industry is not an exemption as the lockdown spurt through the world’s largest economies, leaving the market swamped by cratering demand and unmanageable oversupply.
Crude oil price plunged by 54.18% on average terms, starting the year on a high of $66.74 to close the first quarter of 2020 by $30.58 a barrel. According to the IEA, consumption is expected to crush by 29 million barrels per day. The ballooning supply glut is further collapsing oil futures and its market structure as the world grapple for an evaporating storage capacity.
Sunday, 12th of April, 2020 saw a virtual gathering of the world’s biggest oil producers, in an unprecedented and enthusiastic bid to salvage the global oil market by agreeing a historic production adjustments. Historic because of the volume of the cut and also the duration, as the production cuts are expected to last for two years.
However, the ambitious deal intended to rescue the broken oil market that was claimed to be championed by U.S President Donald Trump has been brushed off by the unprecedented and thunderous plummeting of the U.S Shale’s may futures falling below zero on Monday, 20th April, due to low liquidity and limited available storage capacity. U.S shale is traded in America Benchmark – West Texas Intermediate (WTI) while we in Ghana concern ourselves with International Benchmark – Brent Crude.
According to IEA, partial or total lockdowns are in force in 187 countries and territories, and although they are different in scope, activity in the transportation sector has fallen dramatically almost everywhere. IEA expect that global oil demand in 2020 will fall by 9.3 million per day (mb/d) versus, erasing a decade of growth. It is worthy to note that an estimated 60% of global oil demand is used in the transport sector and with about 3 billion people in lockdown; the demand for the black gold is terribly low.
The price war recently witnessed between Saudi Arabia and Russia, has also exacerbated the current crisis of ballooning and unmanageable oversupply. Russia resistance to deeper oil production cuts proposal by OPEC+ led Saudi Arabia during OPEC 178TH extraordinary meeting has led flooding of the market with crude oil with a collapsing demand and an overwhelmed storage capacity.
As different conspiracy theorists advance various reasons for the price war, i.e. an indirect attempt to collapse U.S Shale Industry, to drive prices low to kill a thriving Renewable industry, retaliation by Russia because of Trump’s sanctions on Nordstream, Rosneft Trading, for Saudis to establish themselves as a market leader, etc, theorists fell short to project a broken energy market that may never recover it demand prospects ever again.
While U.S Shale companies file for bankruptcy and other oil majors such as Royal Dutch Shell Plc, Italy’s Eni SpA, Norway’s Equinor ASA and French major Total SA are taking prompt steps to augment their financial strength and resilience by reducing spending, investment, freezing recruitment and terminating their share buyback strategies.
African countries are facing triple blow of loss of revenue, loss of investment and loss of market share due to collapsing oil prices as result of cratering demand, supply glut and dwindling storage capacity. The plummeting oil prices is not only making it extremely difficult for oil producing African countries to raise the needed petroleum receipts to help combat the novel Coronavirus but driving away investment by big oil majors in oil prospecting and development as well as ceding of market shares to other foreign countries with cheaper crude prices due to relatively low production cost.
Ghana is not immune to the devastating impact of the destruction of crude oil consumption as we have seen our projected petroleum receipts for 2020 shredded into pieces. With our benchmark pegged above $62 a barrel at the beginning of the year, prices of International Benchmark – Brent Crude is currently languishing around $20 per barrel, a whopping 70% reduction in our benchmark.
As government mourns drastic reduction in its petroleum revenue, we have to wipe our tears as the institution mandated to hold our strategic reserve is unable to acquire and store crude products for the future benefits of Ghanaians.
The Bulk Oil Storage and Transportation Company Limited – BOST, due to poor management, improper planning, lack of efficiency, illogical sequencing of policies, etc in recent times are unable to fully take advantage of current happenings on the global oil market unlike other countries like China, America etc that are buying cheap products to fill their strategic reserves.
Restrictions in movement has also taken devastating toll on Oil Marketing Companies (OMCs) as their sale has taken thunderous hit of 70% from an average sale volume of 5000 before lockdown to an average sale volume of 1500. Some of the Oil Market Companies are virtually wallowing in debts as they have to borrow to lift products as well as pay their mandatory tax to Ghana Revenue Authority on any lift.
On the local market, there has been a 15% average reduction for the consumers in the first quarter of 2020. While this is modest relief to the, trotro drivers, commuters, market women, farmers etc, it is worthy to note that a stable market is more desirable to a volatile market. Stable oil market ensures thriving companies on supply chain of the local oil market, providing essential services to consumers, providing employments, contributing to government’s revenue basket.
As the world continue to battle Covid-19 and witness historic turbulence in the crude oil market, it is very important for oil producing countries (OPEC & NON – OPEC Members) to consider a more deeper cut sooner than later while world strategic reserves are made available to absorb some of the excess barrels on the market. Locally, government must begin to have a conversation around providing relief packages for OMCs in terms of extending the duration of payment of tax by OMCs after they lift crude products.
We are indeed in extraordinary times, kindly stay at home to save lives and save your community. If it becomes necessary to step out, please wear your nose masks, observe all the social distancing and health protocols. I leave you with one of my favourite verses in the bible – “Have I not commanded you? Be strong & courageous. Do not be afraid; do not be discouraged, for the Lord your God will be with you wherever you go.” Joshua 1:9.
The writer is a Research & Policy Analyst with Institute for Energy Security
Ghana: Minister Urges Electricity Users To Cooperate With ECG, NEDCo
Ghana’s Minister for Energy, John-Peter Amewu has urged consumers of electricity in the West African nation to cooperate with the power distribution companies- Electricity Company of Ghana and Northern Electricity Distribution Company-as they are working to replace some obsolete equipment in all their operational areas.
The replacement of the obsolete equipment has become necessary because they cause power interruptions.
The exercise is likely to result in pockets of outages in some areas.
ECG provides electricity to the southern parts of the West African nation while NEDCo serves the northern part of the country.
A statement signed by the Managing Director of ECG, Kwame Agyeman-Budu, said: “In undertaking these system improvement works, some will require local outages to create a safe working environment.
“The company will, therefore, ensure that affected customers are informed accordingly. We entreat our customers and the general public to report all faults to our customer service center on 0302-611611 or via the Company’s official social media handles (@ecgghofficial),” the statement concluded.
Speaking to the media in Tema after commissioning a 330 kV/161 kV interconnection auto transformer funded by GRIDCo and Sunon Asogli Power (Ghana) Limited, Mr Amewu said the exercise is in the interest of the country and urged all consumers to cooperate.
According to him, the completion of the exercise will end the interruptions in power supply across the country.
Source: www.energynewsafrica.com