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Oil industry loses $600b to price slump



  • Industrial sector records N8.9tn output

With the global oil price slump leading to cancellations of significant projects and delays put at $600 billion, oil and gas industry players have been urged to adopt cost-saving processes to remain in business.

The Managing Director/Chief Executive Officer, First Exploration and Petroleum Development Company Limited, Ademola Adeyemi-Bero, who gave the advice, said the over-supply and oil in storage are still at record levels, which is about three billion barrels.

He said global demand growth for oil would continue steady at 1.2 million barrels per day (bpd) per year.

He noted that the global over supply has been driven by the United States shale play and Canadian oil sands mines, despite the fact that United States oil and gas drilling experiencing a historic drop, well below 1990’s levels.

Adeyemi-Bero said US oil shale reservoir declined by 6.8 per cent monthly, but that these factors don’t have visible impact because of market over-supply. He said most private players were driven by major budget cuts and shortages and that Brent oil price has reached bottom level while Henry hub gas price touched below $2 per million standard cubic feet (MSCF) with the US exporting its first liquefied natural gas (LNG) cargo in over four decades.

According to him, the global supplier with untapped fields (wild cats), are Iran and Iraq, while the primary energy demand drivers are China, Organisation for Economic Co-operation and Development (OECD) countries and India, and all are yet to pick up.

Besides, he noted that all producers (Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC) that are able to grow production are increasing supply despite the oversupply, adding that highest cost tar producers – Venezuela and Canada – are still showing production growth.

To counter oil price volatility and instability, Adeyemi-Bero said smart solutions must be deployed to derive maximum value during project development and execution and throughout asset lifecycle operations.

He canvassed the use of low unit technical cost (UTC), such as maximizing hydrocarbon recovery and reservoir development and reservoir and facility management.

He said industry players had to minimize project delivery timeline and lifecycle development costs, that is, project delivery (wells and facilities) and operating costs, ensure enabling environment while eliminating third party interference.

To address the problem, Adeyemi-Bero said approval and contracting cycle should improved, adding that the Joint Venture (JV) contracting and procurement and approval processes significantly erodes project value.

He also noted that JV cash call processes in the last 10 years has killed growth. He said hydrocarbon recovery has to be maximized, wells and facilities development costs minimized, and also minimize deferments through efficiency in operations and maintenance of equipment.

He said production losses and decline can be minimized through efficiency in export operations, production metering and reconciliation, efficiency in wells, reservoir and facilities management.

In the meantime, the manufacturing sector recorded an increase of N289bn in its output from N8.68tn in 2014 to N8.94tn at the end of December 2015, figures obtained from the National Bureau of Statistics have revealed.

According to the NBS, there are 13 activities in the manufacturing sector made up of oil refining; cement; food, beverages and tobacco; textile, apparel and footwear; wood and wood products; pulp and paper products; chemical and pharmaceutical products.

Others are non-metallic products, plastic and rubber products; electrical and electronic, basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.

An analysis of the output for the manufacturing sector showed that despite the harsh operating environment, which had led to massive job losses and closure of some industries, the sector continued to show resilience.

Apart from oil refining and other manufacturing activities, which recorded a decline of N137.79bn and N3.39bn from N385.81bn and N434.49bn to N248.02bn and N431.1bn respectively, other activities in the sector experienced some level of growth.

For instance, there was an increase of N145.32bn in the cement industry from N604.61bn in 2014 to N749.93bn, while the food, textile, wood and paper products industries rose from N4.24tn, N1.81tn, N238.5bn and N59.92bn to N4.29tn, N1.87tn, N259.25bn and N66.09bn, respectively.

The pharmaceutical industry recorded N35.51bn increase in output from N154.61bn to N190.12bn while non-metallic products, plastics, electrical, iron and steel, as well as motor vehicles also grew from N259.28bn, N221.95b, N5.75b, N195.76bn and N67.14bn to N315.59bn, N267.16bn, N6.02bn, N207.3bn and N70.05bn in that order.

In terms of the quarterly performance for the manufacturing sector, the NBS report said, “Nominal growth of manufacturing in the fourth quarter of 2015 was recorded at 6.93 per cent year-on- year, 12.19 per cent points lower than the 19.12 per cent recorded in the corresponding period of 2014 partly as a result of higher operating costs.

“Growth was 2.13 per cent points higher than the third quarter of 2015 which was recorded at 4.8 per cent. On a quarter on quarter basis, the sector grew by 0.33 per cent.”

It said the contribution of the manufacturing sector to total economic output was 9.09 per cent in the fourth quarter of 2015, lower than the 9.11 per cent recorded in the corresponding period of 2014, and 9.67 per cent in the third quarter of 2015.

Commenting on the output of the sector, analysts said despite the resilience showed by the sector in 2015, there was need for government to come up with a well- articulated industrial strategy that would assist in addressing the structural challenges which had made the operating environment hostile.

A former Managing Director, Unity Bank Plc, Mr Rislanudeeen Muhammed, told our correspondent that while incentives for manufacturing were already in place, there was a need for cohesion of policies to achieve the needed impact.

Muhammed, who is also the CEO of Safur Investments Limited, said, “There is no way that you can grow an economy without a well-articulated development strategy.

“This is the best time that we need to look ourselves and come up with a synchronised and excellent structure that facilitates cohesion of policy among the Federal Ministry of Finance, National Planning Commission, the Central Bank of Nigeria, the Debt Management Office and the Office of the Economic Adviser to the President.”

Also, the President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, told our correspondent that while the tough operating environment had led to the closure of so many companies, the uncertainty in the foreign exchange market, infrastructure deficit and the absence of adequate incentives to attract investors into key sectors of the economy needed to be addressed.

He said, “The Abuja Chamber of Commerce and Industry has made it known to the government that the issue of power and energy must be urgently addressed in order to promote industry, boost productivity, and attract both foreign and local direct investment.

“Power and energy sufficiency is the fulcrum of any meaningful development of the economy. This is the time for us as a nation to start implementing consistent policies geared towards attracting investments that will revitalise our industries.”

He said the that the nation’s economic growth rate, which had fallen from an average of five per cent two years ago to about 2.71 per cent, was as a result of the prevailing problems facing the country.

Nation with additional report from Upshot

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners



…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live



The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured



…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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