…As OPEC cuts 2020 oil demand forecast, urges effort to avert new glut***
Nigeria LNG Limited on Wednesday made a significant step toward the Final Investment Decision (FID) for its Train 7 Project.
This followed the issuance of a Letter of Intent for the Engineering, Procurement and Construction (EPC) contract of the project to SCD JV Consortium.
Mrs Eyono Fatayi-Williams, the company’s General Manager, External Relations, said in Lagos that the contract letter was issued recently in Abuja.
The SCD JV Consortium is made up of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea.
Fatayi-Williams said the issuance was coming on the heels of the Nigeria Content (NC) plan signed with the Nigerian Content Development Monitoring Board (NCDMB).
She said this also tilted on the Sept. 3 NLNG,’s submission of the summary outcome of the commercial bids evaluation for the “Train 7 Project’’ to NCDMB in line with the project certification and authorisation procedure.
According to her, the letter of intent is one of the significant step toward the realisation of “Train 7’’ and its attendant value to NLNG’s shareholders and for the benefit of the Nigerian economy.
Fatayi-Williams said the contracting process was transparent and in full compliance with all applicable laws and good industry practices.
She said that it would continue to operate its business in an open manner consistent with its core values of integrity and excellence.
Fatayi-Williams said the “Train 7 Project’’ was expected to ramp up NLNG’s production capacity by 35 per cent from 22 million Tonnes per Annum (MTPA) to around 30 MTPA.
She said the project would form part of investment of over 10 billion dollars, including the upstream scope of the LNG value chain, thereby boosting the much needed Foreign Direct Investment (FDI) profile of Nigeria.
“The project is anticipated to create about 10,000 new jobs during the construction stage, and on completion, help to further diversify the revenue portfolio of the Federal Government and increase its tax base.
She said that this was in line with its corporate vision of “Helping to build a better Nigeria”, adding that the construction period after FID will last approximately four to five years.
Fatayi-Williams said that the actualisation of the “Train 7 Project’’ comes as NLNG celebrates 30 years of its incorporation and 20 years since exporting its first LNG cargo in 1999.
NLNG is owned by four Shareholders: the Federal Government of Nigeria, represented by Nigerian National Petroleum Corporation (49 per cent), Shell Gas B.V. (25.6 per cent), Total Gaz Electricite Holdings France (15 per cent), and Eni International N.A. N. V. S.àr. l (10.4 per cent ).
Meanwhile, OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 due to an economic slowdown, an outlook the producer group said highlighted the need for ongoing efforts to prevent a new glut of crude.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said oil demand worldwide would expand by 1.08 million barrels per day, 60,000 bpd less than previously estimated, and indicated the market would be in surplus.
The weaker outlook amid a U.S.-China trade war and Brexit could press the case for OPEC and its allies to maintain or adjust their policy of cutting output.
Iraq said ministers would on Thursday discuss whether deeper cuts were needed.
OPEC, in the report, lowered its forecast for world economic growth in 2020 to 3.1 per cent from 3.2 per cent and said next year’s increase in oil demand would be outpaced by “strong growth” in supply from rival producers such as the United States.
“This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance,” the report said.
OPEC, Russia and other producers have since Jan. 1 implemented a deal to cut output by 1.2 million bpd.
The alliance, known as OPEC+, in July renewed the pact until March 2020 and a committee reviewing the pact meets on Thursday.
Oil prices LCOc1 pared an earlier gain after the report was released to sit just below 63 dollars a barrel. Despite the OPEC-led cut, oil has tumbled from April’s 2019 peak above 75 dollars, pressured by trade concerns and an economic slowdown.
The report said oil inventories in industrialized economies fell in July, a development that could ease OPEC concern over a possible glut.
Even so, stocks in July exceeded the five-year average – a yardstick OPEC watches closely – by 36 million barrels.
OPEC and its partners have been limiting supply since 2017, helping to clear a glut that built up in 2014-2016 when producers pumped at will, and revive prices.
The policy has given a sustained boost to U.S. shale and other rival supply, and the report suggests the world will need less OPEC crude next year.
Demand for OPEC crude will average 29.40 million bpd in 2020, OPEC said, down 1.2 million bpd from this year.
OPEC said its oil output in August rose, however, by 136,000 bpd to 29.74 million bpd according to figures the group collects from secondary sources.
It was the first increase this year. Saudi Arabia, Iraq and Nigeria boosted supply.
Top exporter Saudi Arabia told OPEC that the kingdom raised August output by just over 200,000 bpd to 9.789 million bpd.
Saudi Arabia continues to pump far less than its quota of 10.311 bpd.
Thanks in part to Saudi restraint, producers are still over-complying with the supply-cutting deal. Losses in Iran and Venezuela, two OPEC members facing U.S. sanctions, have widened the supply reduction.
August’s increase, however, puts OPEC output further above the 2020 demand forecast.
The report suggests there will be a 2020 supply surplus of 340,000 bpd if OPEC keeps pumping at August’s rate and other things remain equal, more than the surplus forecast in last month’s report.