NNPC Signs $1bn Deal With Afreximbank

Nigerian National Petroleum Corporation (NNPC) has signed a $1.04 billion deal with the African Export-Import Bank (Afreximbank).

Gatekeepers News reports that NNPC has signed the biggest deal so far at the ongoing Intra-African Trade Fair in Durban, South Africa. The five-year deal which was signed with Afreximbank is worth $1.04 billion.

This follows the prediction of the Group Managing Director of the NNPC, Mallam Mele Kyari which stated that crude oil prices may hit $100 per barrel mark in the coming months as global inventory tightens and the Organisation of Petroleum Exporting Countries (OPEC) continues to resist pressure to pump more oil into the market.

Although details of the deal remain sketchy, reports say the NNPC and Afreximbank deal did not involve exploration of crude oil but was mainly for trade financing and export of the crude produced by the national oil company.

The $1.04 billion would be repaid to the continental bank with about 25,000bpd of crude oil produced by NNPC.

The President of the bank, Benedict Oramah said the deal would benefit Nigeria, adding that it will fund similar projects across Africa.

Similarly, Afreximbank signed a $250 million contract with an aviation logistics company, Blue Horn, to fund the upgrading of three airports in Nigeria and another $270 deal for oil exploration activities with Mars E&P.

The Intra-African Trade Fair (IATF2021) which kicked off on November 15 is themed: “Building Bridges for a successful AfCFTA”. It has so far attracted thousands of visitors to the Durban International Convention Centre where it’s taking place.

In other news, Kyari while speaking Bloomberg Television, raised doubts about the ability of the producers’ group to ramp up production in the short term as an investment in the industry continues to wane.

Meanwhile, OPEC has continued to stick with its agreed plan to release an additional supply of 400, 000 barrels every month to gradually return the cuts it embarked upon in the wake of the COVID-19 pandemic last year, despite promptings from the United States, India, Japan, and other countries to supply more barrels.

The global oil market currently has a deficit of over 600,000 bpd, a development that has led to an increase in oil and gas prices, bringing attendant inflationary pressures.

Despite allocating over 1.6 million bpd to Nigeria in September and October, the country was only able to supply 1.399 million bpd in September and 1.354 million barrels in October owing to the weak infrastructure and sabotage.

Kyari further argued that the plan by the United States to release oil from its special reserves has to be very significant to make any long-term impact on global oil prices.

He explained that although Nigeria has faltered in meeting its OPEC allocation, by the end of the year, the country may be able to hit 1.8 million bpd, excluding condensates.

The NNPC boss said, “It’s very obvious that by the close of the year, we will get back to the 1.7 barrels to 1.8 barrels per day of crude oil. When I mention this figure, I am only talking about crude oil because we also produce condensates and when you combine, we can easily hit 2.0 million barrels by the end of the year.”

While reiterating that Nigeria was hugely impacted by its inability to restart the oil facilities after the COVID-19-induced shutdowns, he emphasised that more investments were being expected in the country’s oil and gas industry due to the fresh clarity around the fiscal environment with the introduction of the Petroleum Industry Act (PIA).

Kyari said, “The fact is very clear, during the covid-19 pandemic, we shut down some of these wells and they usually don’t come back as early as we want them.

“Right now, we do have some challenges around the facilities and these are being taken care of. There’s enormous work going on that will get us back before the end of the year.

“There was some level of lack of clarity in our own fiscal environment and this is being sorted out by the passage of the Petroleum Industry Act (PIA). And the meaning of this is that we are seeing very good traction with our key partners in the deep offshore asset development.”

The NNPC GMD said the proposed release of the United States of oil from its special reserve could have some marginal impact on global oil prices since supply is not matching demand, but added that the release has to be significant to make any difference.

“Of course, it’s going to dampen prices for a little while, but because demand is growing and several economies are recovering, it may not be enough or sufficient to create that change that we expect. That means that we still see a situation of $80 in time to come.” Kyari said.

He further noted that if a situation arises when the United States bans export of its crude, prices would likely remain in the $80s, but less than $100, adding that $100 was still within sight.

“That is too ambitious. $200 is too ambitious. $100 looks like it, I don’t see a situation of $100 plus in the short term,” he stated.

Kyari added that several issues, including financing, inability to quickly fill the oil supply deficit were responsible for OPEC’s defiance of calls to raise output, stating that it may not be realisable in the short term to pump more oil and fix the existing spare capacity.

As regards gas, the NNPC GMD said: Yes, we are supplying more gas to Europe, but we are definitely in short supply from LNG because there are some issues concerning our gas supply. This is improving and we are taking many steps to ensure full production of trains 1-6 of the LNG and focus on train 7.

” For 2022, I see some kind of decline in our ability to supply to the market, but this is being mitigated. I am not sure we will be able to do full catch-up by the end of the year, but clearly, the forecast is about 90 cargoes of LNG to be out of the market, but we are doing everything to bring that number below 58 and that will be quite possible and that means more supply to Europe.”

He noted that the oil and gas industry continues to remain in a state of transition, explaining that gas will play a major role in the energy supply mix in the future.

Kyari stressed that “It’s very obvious that the energy industry is in a huge transition. These are very exciting times. Countries are working very hard to meet the NetZero target in 2050, but some countries cannot make it as early as 2050. But obviously, the oil industry is adjusting, people are facing new realities and of course, the focus is changing.

“People are going for more gas development across the globe and also bringing on blue hydrogen. So much is happening and we as a national company see opportunities.”