Nigeria LNG Limited (NLNG) has signed the engineering, procurement and construction (EPC) contracts for its Train 7 Project with the SCD JV Consortium, comprising affiliates of Saipem, Chiyoda and Daewoo.

Shell-run NLNG had earlier selected a consortium comprising the Italian firm, Saipem; South Korea’s Daewoo Engineering and Japanese Chiyoda to build its $7 billion Train-7 in its Bonny Island plant.

Apart from the $7 billion for the construction of Train 7, an additional $3 billion worth of investment would be spent on upstream gas development to meet the expected demands of the new capacity.

The execution of the EPC contracts now triggers the commencement of the detail design and construction (DDC) phase of the project expected to increase the capacity of NLNG’s current six-train plant by 35 per cent from the extant 22 million tonnes per annum (MTPA) to 30 MTPA.

NLNG is an incorporated Joint-Venture owned by four shareholders – Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation (NNPC) holding 49 per cent shares; 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.

Speaking on the contracts’ signing, Tony Attah, managing director and dhief executive officer of NLNG, was quoted in a statement signed by the general manager, external relations and sustainable development, Eyono Fatai-Williams, as saying that the EPC contracts represented yet another milestone in the company’s journey towards achieving its vision of being a global LNG company, helping to build a better Nigeria.

He said: “With the award of the EPC Contracts to our preferred bidders (SCD JV), we are guaranteeing that our country remains significantly on the global list of LNG suppliers. This singular act clearly demonstrates our shareholders’ determination and resolve to sustain the economic dividends that NLNG’s monetization of our vast natural gas reserves offers our great country Nigeria”.
Attah expressed confidence in SCD JV consortium’s proven competence, adding that the demonstration of an understanding of NLNG’s business philosophy by the consortium will positively influence the execution of the project and ensure zero harm to people, environment and host communities.

The statement also quoted Mele Kyari, the group managing director of the NNPC and director on the NLNG Board, as saying that the “Nigeria LNG’s successes, since it started operation in 1999, had continued to prove its unique business model that is profitable to all its stakeholders.

Nigerians consumed about 1. 2 billion litres of petrol in January, with a daily utilisation rate of 38.6 million, a report by the Nigerian National Petroleum Corporation (NNPC), has shown.

The corporation also announced that for the period, its downstream activities were at the lowest, with over 100 per cent deterioration which led to a loss of N1.87 billion, compared to the preceding month.

According to the national oil company, in all, a total of 1,208.46 million litres of the products were sold and distributed by its subsidiary, the Petroleum Products Marketing Company (PPMC) in the month under review, compared to 2,774.78 million litres in the previous month.

“To ensure continuous increased PMS supply and effective distribution across the country, a total of 1.20bn litres of PMS translating to 38.68mn litres/day were supplied for the month.
“The corporation has continued to diligently monitor the daily stock of premium motor spirit (PMS) to achieve smooth distribution of petroleum products and zero fuel queue across the nation” it said.

It added that the 65 per cent decrease in trading surplus decrease in the month arose due to 17 percent drop in the cumulative performance of strategic business units (SBUs) in the upstream and midstream as well as over 100 percent deterioration in downstream activities.

“These weak positions along with deficits of the refineries, ventures and CHQ, led to a decreased surplus to the group” the NNPC said.

The corporation also stated that in line with its commitment to becoming more accountable, responsive and transparent it had continued to sustain effective communication with stakeholders through the reports.

The NNPC said it made a total sum of N151.79 billion from the sale of white products by PPMC in the month under review, compared to N337.63 billion in the preceding month.
“Total revenues generated from the sales of white products for the period January 2019 to January 2020 stood at N2,616.09 billion, where PMS contributed about 97.57 per cent of the total sales with a value of N2,552.53 billion” it said.

Meanwhile, the Department of Petroleum Resources (DPR) has said that it has fuel that will last the next 33 days in its stock, given a daily consumption estimated at 38.6 litres.

Oil prices fell on Monday as investors worried about a second wave of coronavirus infections, but new output cuts from Saudi Arabia tempered worries about oversupply and limited price losses.

Brent crude futures fell $1.04, or 3.4%, to $29.93 a barrel. U.S. West Texas Intermediate (WTI) crude fell 30 cents, or 1.2%, to $24.44 a barrel.

Global oil demand has slumped by about 30% as the coronavirus pandemic has curtailed movement across the world, leading to growing inventories globally. While crude futures have fallen more than 55% this year because of the virus, prices have gained the past two weeks, supported by a modest rebound in demand as some travel restrictions are eased.

However, fears about a second wave of the virus weighed on futures.

Germany reported on Monday that new coronavirus infections were accelerating exponentially after early steps to ease its lockdown. Elsewhere, Wuhan, the epicentre of the outbreak in China, reported its first cluster of infections since the city’s lockdown was lifted a month ago.

South Korea also warned of a second wave of the virus on Sunday.

“Traders stepped back from last week’s enthusiasm, contemplating the possibility of a second wave of the epidemic, which, if realised, could drive demand lower than the market hopes and expects for the second half of 2020,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.

Prices received a boost, however, after a Saudi energy ministry official said the ministry has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million barrels per day.

The reduction is on top of a pact by the Organization of the Petroleum Exporting Countries (OPEC) and allied producers – a group known as OPEC+ – to cut production from May 1 by about 10 million bpd in an effort to support prices.

By Zerohedge.com

The April 20 historic oil price crash that sent the prompt May WTI contract plunging to the unheard of price of negative $40 per barrel now seems like ancient history with oil back in the $20s (at least until the June contract matures in 10 days) and stocks are delightfully levitating, but to one trader what happened on that fateful Monday will remain a permanent scar of how everything can go terribly wrong in the blink of an eye. Syed Shah, a 30-year-old daytrader, would usually buy and sell stocks and currencies through his Interactive Brokers account, but on April 20 he couldn’t resist trying his hand at some oil trading. Shah, working from his house in a Toronto suburb, figured he couldn’t lose as he spent $2,400 snapping up crude at $3.30 a barrel, and then 50 cents. Then came what looked like the deal of a lifetime: buying 212 futures contracts on West Texas Intermediate for an astonishing penny each.

What he didn’t know, as Bloomberg’s Matthew Leising reports, is that oil’s first plunge into negative pricing had broken the Interactive Brokers platform, because its software “couldn’t cope with that pesky minus sign, even though it was always technically possible for the crude market to go upside down.”

As a result, crude was actually trading at a negative $3.70 a barrel when Shah’s screen had it at 1 cent; the reason: Interactive Brokers never displayed a subzero price to him as oil kept diving to end the day at minus $37.63 a barrel.

At midnight, Shah some very bad news: he owed Interactive Brokers $9 million. He’d started the day with $77,000 in his account, expecting that his biggest possible loss was 100%, or $77,000.

It turned out to be 116 times that number.

“I was in shock,” the 30-year-old told Bloomberg in a phone interview. “I felt like everything was going to be taken from me, all my assets.” Not that Shah had anywhere remotely close to $9 million in assets.

Shah was not alone. Countless investors, especially retail daytraders on RobinHood who had followed every tick lower in the USO by buying more of the ETF in hopes of an rebound, had a brutal day on April 20 regardless of what brokerage they had their account in.

What set Interactive Brokers apart is that its customers were flying blind, unable to see that prices had turned negative, or in other cases locked into their investments and blocked from trading. Adding insult to injury, Bloomberg reports that a big reason why Shah lost an unbelievable amount in a few hours, is that the negative numbers also blew up the model Interactive Brokers used to calculate the amount of margin – aka collateral – that customers needed to secure their accounts.

Commenting to Bloomberg, Interactive Brokers chairman and founder Thomas Peterffy, said the journey into negative territory exposed bugs in the company’s software. “It’s a $113 million mistake on our part,” the 75-year-old billionaire said in an interview Wednesday. Since then, his firm revised that loss estimate down to $109.3 million. It’s been a moving target from the start; on April 21, Interactive Brokers figured it was down $88 million from the incident.

The good news for Shah and countless others like him is that customers would be made whole, Peterffy promised. “We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero.”

While IB struggles to resolve the loose ends from the historic plunge, this is how Shah ended up owing millions.

The day trader in Mississauga, Canada, bought his first five contracts for $3.30 each at 1:19 p.m. on that eventful Monday. Over the next 40 minutes or so he bought 21 more, the last for 50 cents. He tried to put an order in for a negative price, but the Interactive Brokers system rejected it, so he became more convinced that it wasn’t possible for oil to go below zero. At 2:11 p.m., he placed that dream-turned-nightmare trade at a penny.

Only hours later, when he finally pulled himself from his computer, did the 30-year-old realize that oil had settled at the never-before-seen price of negative $37.63 per barrel. What did that mean for the hundreds of contracts he’d bought? He frantically tried to contact support at the firm, but no one could help him. Then that late-night statement arrived with a loss so big it was expressed with an exponent.

Across the Atlantic Ocean, Interactive Brokers customer Manfred Koller ran into a similar disaster. Koller, who lives near Frankfurt and trades from his home computer on behalf of two friends, also didn’t realize oil prices could go negative apparently failing to see the numerous warnings from CME and other exchanges that oil, would in fact, be allowed to trade negative.

He’d bought contracts for his friends on Interactive Brokers that day at $11 and between $4 and $5. Just after 2 p.m. New York time, his trading screen froze. “The price feed went black, there were no bids or offers anymore,” he told Bloomberg.  Yet as far as he knew at this point, according to his Interactive Brokers account, he didn’t have anything to worry about as trading closed for the day. That piece of mind did not last long, and shortly after Interactive Brokers sent him notice that he owed $110,000. His friends were completely wiped out. “This is definitely not what you want to do, lose all your money in 20 minutes,” Koller said.

Besides locking up because of negative prices, a second issue concerned the amount of money Interactive Brokers required its customers to have on hand in order to trade. Known as margin, it’s a vital risk measure to ensure traders don’t lose more than they can afford. For the 212 oil contracts Shah bought for 1 cent each, the broker only required his account to have $30 of margin per contract. It was as if Interactive Brokers thought the potential loss of buying at one cent was one cent, rather than the almost unlimited downside that negative prices imply, he said.

“It seems like they didn’t know it could happen,” Shah said.

Of course, it was in fact known that it could happen and as we reported in mid-April, CME warned that benchmark oil contracts could go negative. Five days before the mayhem, the owner of the New York Mercantile Exchange, where the trading took place, sent a notice to all its clearing-member firms advising them that they could test their systems using negative prices. “Effective immediately, firms wishing to test such negative futures and/or strike prices in their systems may utilize CME’s ‘New Release’ testing environments” for crude oil, the exchange said.

And here the fingerpointing begins, because while Interactive Brokers also got that, Peterffy said he didn’t feel five days was enough time to upgrade his company’s trading platform. Five days or not, it appears that IB did nothing in anticipation of such an eventuality.

“Five days, including the weekend, with the coronavirus going on and a complex system where we have to make many changes, was not a sufficient amount of time,” he said. “The idea we could have bugs is not, in my mind, a surprise.” He also acknowledged the error in the margin model Interactive Brokers used that day.

According to Peterffy, its customers were long 563 oil contracts on Nymex, as well as 2,448 related contracts listed at another company, Intercontinental Exchange Inc. For each of those, Interactive Brokers will issue a credit of $37,630, he said.

This is where the math went haywire because according to the Interactive Brokers margin model, similar trades to what Shah placed would have required $6,930 per trade in margin if he placed them at Intercontinental Exchange. That’s 231 times the $30 Interactive Brokers charged.

“I realized after the fact the margin for those contracts is very high and these trades should never have been processed,” he said. He didn’t sleep for three nights after getting the $9 million margin call, he said.

Peterffy said there’s a problem with how exchanges design their contracts because the trading dries up as they near expiration. The May oil futures contract — the one that went negative — was expired the next day after the historic plunge, so most of the market had moved to trading the June contract.

“That’s how it’s possible for these contracts to go absolutely crazy and close at a price that has no economic justification,” Peterffy said. “The issue is whose responsibility is this?”

Well, it’s the responsibility of those who offer the contract for sale, and in this case IB had absolutely no idea what it would do when prices turned negative. And neither did the largest oil ETF, the USO, but that’s a story for another time.

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This post first appeared on OilPrice.com

The federal government will offer marginal oil fields for auction this year despite the crash in crude oil prices, Mele Kyari, the group managing director of the Nigerian National Petroleum Corporation, has said.

The country has not conducted any licensing round since 2007, while a marginal fields round was last held in 2003.

Kyari said the government would not be able to conduct any major licensing round as the current market realities would dampen foreign investors’ appetite.

He spoke on Tuesday during a virtual dialogue session on government fiscal policy decisions in response to the current challenges organised by the Ministry of Finance and the UK Department for International Development Partnership to Engage, Reform and Learn.

He said, “Marginal fields by their very nature, require very small-scale investment. Countries normally do this (licensing round) to encourage local participation and this local participation are usually funded by local borrowings because the scale of investment is not huge.

“So, you can typically do a marginal fields bid round even when oil prices are low because their costs of production are usually lower; they don’t need huge capital outlay. It is possible to do a marginal fields bid round this period.”

Kyari ruled out the possibility of conducting “a substantive, full-scale licensing round, where you require foreign investments”.

He said, “This is not the best time to call foreign investors to participate in any bid round. The licences will be priced very low, and even the appetite will be very low”

Oil prices fell on Wednesday, ending a multi-day streak of gains, as investors focused on oversupply risks after U.S. crude inventories rose more than expected amid a slump in demand caused by restrictions to halt the coronavirus spread.

U.S. West Texas Intermediate (WTI) crude futures fell as much as 2.1% to $24.05 a barrel and were down 14 cents at $24.41 a barrel at 0201 GMT. WTI has snapped a five-day winning streak.

Brent crude futures were flat at $30.97 a barrel.

Brent prices climbed 13.9% in the previous session, part of a six-day rise.

Investors may be hesitant to increase their purchases of Brent as the contract has climbed too much over the past streak.

Brent’s relative strength index, a technical measure used to track the future’s trading momentum, was at 72.93 on Wednesday, indicating it is overbought after the recent gains.

WTI also slipped after a report showed U.S. crude inventories rose 8.4 million barrels last week, more than expected, according to data from the American Petroleum Institute late on Tuesday.

Oil prices had gained recently as European and Asian countries had ended their lockdowns to halt the coronavirus spread and as producers had axed supply after the demand crunch. But analysts cautioned the rebalancing of the market would be choppy.

“We’re talking about normalisation of supply and demand but we’ve got a long way to go,” said Lachlan Shaw, National Australia Bank’s head of commodity strategy.

“There are a lot of supply cuts that have come through. That combined with some early signs of demand lifting has meant the rate of inventory build is slowing.”

But analysts also pointed to comments by U.S. shale producer Diamondback Energy saying it would consider reviving drilling plans if WTI held above $30 a barrel as a sign that producers will not want to shut in production for long.

“When (prices) start to hold on to those gains, there’ll be a point where producers start to reverse those well shut-ins,” Shaw said.

Gasoline stocks in the U.S., the world’s biggest producer and consumer of oil, fell by 2.2 million barrels, API reported, compared with analysts’ expectations in a Reuters poll for a 43,000 barrel increase, and refinery crude runs rose.

Traders will be looking for further confirmation of the inventory data when the Energy Information Administration comes out later on Wednesday.

Nigerians will pay much higher tariff for power in 2021, going by promises made by the federal government to the International Monetary Fund while seeking the $3.4bn emergency financial assistance recently approved for Nigeria.

The executive board of the IMF approved the Rapid Financing Instrument, which the Federal Government plans to use to address the economic impact of the COVID-19 pandemic in the country, on April 28.

A Letter of Intent, jointly signed by the Zainab Ahmed, finance minister, and Godwin Emefiele, the governor of Central Bank of Nigeria, and addressed to the IMF managing director, Kristalina Georgieva, indicated that the federal government made a number of promises to the fund in order to secure the financial assistance.

One of the promises, or commitments, which the government made in a bid to assure the executive board of the IMF of its readiness to reposition the Nigerian economy after the pandemic, is that Nigerians would pay full cost-reflective tariff for power in 2021.

The federal government also told the IMF it intends to cap electricity tariff shortfalls to N380bn in 2020.

“We are also advancing in our power sector reforms – with technical assistance and financial support from the World Bank – including through capping electricity tariff shortfalls this year to N380bn and moving to full cost-reflective tariffs in 2021,” the Federal government said in the letter.

On January 4, the Nigerian Electricity Regulatory Commission approved an increase in electricity tariff for the 11 electricity distribution companies in Nigeria.

It, however, could not implement the tariff increase after labour unions, lawmakers and other Nigerians kicked against the move, which would have commenced on April 1, 2020.

Although the NERC-reviewed tariff was not cost-reflective enough as required by power distributors, it showed that Nigerians would definitely pay more for electricity if it had been implemented.

This, therefore, implies that once the government enforces the payment of full cost-reflective tariff, in line with the promise to the IMF, power users might pay far higher than what was projected in NERC’s recent tariff review.

The commission had explained that its directive on the January 2020 tariff regime for different Discos superseded the earlier one issued on the subject matter.

According to details of the review published by the commission in January, for the Abuja Electricity Distribution Company, residential customers in R3 category who were paying N27.20 per unit would have been paying N47.09, had the regime started on April 1, 2020.

In what may have compounded Nigeria’s energy crisis, India, the country’s largest importer of crude oil, reported a 60% slump in gasoline and diesel demand in April 2020.

According to information obtained from oilprice, India, the world’s third-largest oil importer, recorded the crash in demand due to a nationwide lockdown to contain the spread of the coronavirus pandemic. The Indian Government, which announced the lockdown at the end of March, further extended it to the middle of May.

Gasoline and diesel sales in India crashed by 61% and 57% respectively in April, according to the provisional industry data provided to Reuters by 2 industry sources. The demand crash was more pronounced at the beginning of April, with gasoline sales plunging by 61% and diesel sales plunging by 64% in the first half of the month.

The low fuel demand is triggered by the lockdown, just as the refineries have cut their run rates and are battling with an almost filled up crude and refined products storage capacity.

This is a piece of bad news for Nigeria, as it has been struggling to sell its crude, even at discounted prices sometimes, but is still left with a lot of unsold cargoes of crude oil.

India overtook the United States as the largest importer of Nigeria’s crude oil, buying almost 400,000 barrels of crude oil per day, which is about 20% of Nigeria’s crude oil export.

The crude oil export revenue from India in the last quarter of 2019 was N592.5 billion, while the total export for the year 2019 is about N2 trillion. This will heavily affect Nigeria’s already low revenue and foreign exchange earnings.

It could be recalled that the NNPC Spokesman, Kehinde Obateru, during an interaction with journalists, said that Nigeria might consider production shutdown if the market conditions, like low oil prices, low oil demand and the storage crisis, persist.

More than 1,000 graduate trainees recently recruited by the Nigerian National Petroleum Corporation are to assume duty from Monday, May 4, 2020.

Kennie Obateru, NNPC’s group general manager, group public affairs division, disclosed this on Thursday in a statement issued in Abuja.

He said the trainees would assume duty first virtually, while the corporation would monitor the COVID -19 situation and the Federal Government’s directives to determine a date of physical assumption of duty.

Obateru said the option of virtual assumption of duty was necessitated by the need to comply with extant protocol on social distancing and reduced number of people in the workplace, among other measures that had been introduced by the government as a result of the pandemic.

He said the trainees had completed online documentation and would commence virtual onboarding by Monday.

The statement stated that the Group Managing Director, NNPC, Mele Kyari, was excited about the assumption of duty of the graduate trainees, as he noted that they were part of the succession plan to assure the corporation’s future.

Kyari congratulated the successful graduate trainees and said much was expected of them.

NNPC said the assumption of duty of the graduate trainees marked the successful completion of the 2019/2020 recruitment exercise.