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Why The West African Oil Boom Ended So Abruptly

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Global oil production is slowly recovering towards pre-Covid-19 levels, but in West Africa the pandemic is set to leave lasting effects. This important region for sweet crude oil production faces numerous challenges as it strives to heal from the pandemic, including underinvestment, a lack of infill drilling at mature fields, and infrastructure that is either aging or threatened, a Rystad Energy analysis showed.

Sweet crude is the preferred oil grade to make jet fuel – the worst-hit segment as oil demand plunged last year. West African crude oil production dropped to 3.71 million barrels per day (bpd) last year from 4.12 million bpd in 2019, and is set to decline further to 3.39 million bpd this year. While we expect output to tick back up in 2022 and 2023 as jet fuel demand returns, production is set to fall below 3 million bpd already from 2025 unless heavyweights Nigeria and Angola can stage a strong comeback and shake off the dismal growth trends of the past decade.

West Africa’s oil production was not destined to follow this current grim projection before Covid-19 hit – in fact, the region was in line for more investment and activity. Last year’s low oil prices and the unstable market conditions that have continued into 2021 changed the outlook, however, as major operators decided to practice capital discipline and limit their investment exposure in regions including West Africa.

As a result, Rystad Energy has reduced its forecast for West African crude oil output by 600,000 bpd for 2021 and by 650,000 bpd for 2026, compared with our pre-Covid-19 projections.

“The structural upstream obstacles that West Africa faces are realities that are not going away in the short term. Even if jet fuel makes a spectacular recovery and demand for light and medium sweet crude grades returns, Nigeria and Angola, as well as other neighbors in structural upstream decline, will not be in a position to supply the market,” says Nishant Bhushan, upstream analyst at Rystad Energy.

The region’s decline in 2021 is driven by its two biggest oil producers, Nigeria and Angola, which together are estimated to have lost 440,000 bpd versus the pre-Covid-19 forecast. We also estimate that crude oil production has dropped significantly in countries such as Congo, Gabon, and Equatorial Guinea, which together produced between 250,000 bpd and 300,000 bpd in 2010. Equatorial Guinea has seen a 60% reduction in oil production and Gabon nearly 35% in the past 11 years.

Crude oil production from West African countries was expected to pick up pace in tandem with their Middle Eastern counterparts as the OPEC+ group opened its supply taps. But even as OPEC+ production caps have gradually eased, Nigeria and Angola have not been able to ramp back up to their pre-shut-in production levels.

Crude production is not the only thing that’s been hit in the past couple of years. Since the start of 2020, we have also seen that the overall crude production capacity in Nigeria and Angola has taken a major blow. This is due to a number of reasons, including rapid declines at mature fields due to a lack of infill drilling, postponement of final investment decisions that were originally planned for 2020 and 2021, a lack of investment in oil and pipeline infrastructure which leads to frequent production shut-ins (prevalent in Nigeria), and civil unrest caused by militia groups.

West Africa has never had much unused capacity – most countries have produced at maximum capacity even as that capacity was gradually declining. When OPEC+ unveiled its massive 9.8 million bpd cut program in May 2020, the region had an overall oil production capacity of 4.2 million bpd. We estimate this has dropped by almost 420,000 bpd to around 3.8 million bpd by the end of 2021, and will keep shrinking to 3.5-3.6 million bpd by the end of next year.

Nigeria

Nigeria produces sweet crude grades ranging from light to heavy, but most of the volumes fall into medium to light grades. We expect the output of all sweet crude grades in Nigeria will decrease on the back of declining production from mature fields. The major drop in crude oil production is in grades like Bonga, Egina, and Qua IBoe, which are estimated to fall collectively by 180,000 bpd to 200,000 bpd by 2026 from 2021. Other crude grades, like Forcados, Bonny Light, Escravos, and Erha, are estimated to remain little changed, while some growth will be seen in crude grades like Amenam, Brass River, and Jonas Creek.

The decline in Nigeria’s crude oil production in recent years looks more structural as the country has failed to attract new investments in its oil and gas industry, be it in exploration, greenfield developments, or brownfield expansions. In the short term, we estimate Nigeria’s crude oil production will rise to about 1.55 million bpd in 2022 and 1.58 million bpd in 2023, with some new marginal field developments adding 30,000-35,000 bpd in 2022 and another 35,000-40,000 bpd in 2023. At the same time, some fields currently in the ramp-up phase are estimated to add 65,000-70,000 bpd in 2022, but only 10,000-15,000 bpd in 2023. After 2023, we estimate Nigeria’s output will continue to slide due to a lack of significant new discoveries, slipping to as low as 1.25 million bpd by 2026.

Angola

Like Nigeria, Angola’s decline in crude oil production is also structural, and production has been plummeting since 2015 – from 1.74 million bpd in 2015 to almost 1.11 million bpd in 2021. This output slump is the direct result of a lack of new investments in exploration and a failure by operators to halt the production decline at mature oil fields. New upstream projects are estimated to add 40,000-45,000 bpd this year and another 80,000-90,000 bpd in 2022, but this will not be enough to halt the downward spiral that will reduce Angola’s crude oil production to between 750,000 bpd and 800,000 bpd by 2026.

Angola mostly produces sweet crude, and we expect production of all the major sweet crude grades to slide in the coming years. We see overall sweet to regular crude grade output slumping by almost 300,000 bpd from 2021 to 2026 – a drop of about 30%. Major crude grades such as Nemba, Dalia, Mostarda, Gindungo, Girassol, and Kissanje are estimated to cumulatively decline by 280,000-300,000 bpd in 2026 from 2021. Some smaller crude grades like Sangos, Saturno, Cabinda, and Plutonio are estimated to remain at similar levels or inch up by 15,000-20,000 bpd combined.

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Africa

Nigeria launches Africa’s biggest oil refinery

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Nigeria is a major oil producer but most of this is sent abroad while it has to import the refined fuel used in vehicles and elsewhere.

As a result the country often faces chronic fuel shortages.

This is the problem that the $19bn (£15.2bn) refinery, owned by Africa’s richest man, Aliko Dangote, is intended to tackle.

“This is a game-changer for the Nigerian people,” said President Muhammadu Buhari.

The plant, which is not yet operational, has the capacity to produce about 650,000 barrels of petroleum products a day – more than enough to supply the country’s needs. It also includes a power station, deep seaport and fertiliser plant.

Nigeria’s existing refineries have been completely shut down for over three years owing to oil theft, pipeline vandalism and structural neglect.

If it works as planned, the plant could make a real change to the lives of Nigerians: “Every time there is fuel scarcity, I don’t open my shop because there’s no light [electricity] to work and I can’t buy fuel for my generator,” a young hairdresser from Lagos told the BBC.

At Monday’s launch, Mr Dangote outlined his hopes for the refinery: “Our first goal is to ramp up production of the various products to ensure that within this year, we are able to fully satisfy the nation’s demand for quality products.”

However, it is not clear what impact the plant will have on the price of fuel in a country where retail prices are subsidised. The government says these subsidies will soon be removed – last year they took up at least a quarter of the national budget.

Mr Dangote’s plant in Lagos, which took nearly seven years to build, is said to be the world’s largest single-train refinery, meaning the plant has one integrated distillery system which can produce a variety of products and petrochemicals, instead of having different units for each type of product.

It is one of the last major projects to be inaugurated by President Buhari, who steps down next week after serving two terms in office.

President Buhari will hand power to Bola Tinubu, who won disputed presidential elections in February.

Oil and gas expert Henry Adigun told the BBC that Monday’s launch was “more political than technical”.

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UN agency suspends food aid to Ethiopia’s Tigray amid theft

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NAIROBI, Kenya (AP) — The United Nations food relief agency has suspended aid deliveries to Ethiopia’s northern Tigray region amid an internal investigation into the theft of food meant for hungry people, according to four humanitarian workers.

The World Food Program is responsible for delivering food from the U.N. and other partners to Tigray, the center of a devastating two-year civil war that ended with a ceasefire in November.

More than 5 million of the region’s 6 million people rely on aid.

WFP informed its humanitarian partners on April 20 that it was temporarily suspending deliveries of food to Tigray amid reports of food misappropriation, one of the four humanitarian workers told AP. Three other aid workers confirmed this information. They all insisted on anonymity because they were not authorized to speak to a journalist on this matter.

Last month, AP reported that the WFP was investigating cases of food misappropriation and diversion in Ethiopia, where a total of 20 million people need humanitarian help due to drought and conflict.

A letter sent by the WFP’s Ethiopia director on April 5 asked humanitarian partners to share “any information or cases of food misuse, misappropriation or diversion that you are aware of or that are brought to your attention by your staff, beneficiaries or local authorities.”

At the time, two aid workers told AP that the stolen supplies included enough food to feed 100,000 people. The food was discovered missing from a warehouse in the Tigray city of Sheraro. It was not clear who was responsible for the theft.

Tigray’s new interim president, Getachew Reda, said last month he discussed “the growing challenge of diversion & sale of food aid meant for the needy” with senior WFP officials during a visit by the agency to Mekele, the regional capital.

A spokesperson for the WFP in Ethiopia did not immediately respond to a request for comment.

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OMG: This South African soprano will make British coronation history!

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Pretty Yende will soon go down in history as the first African to be invited to perform a solo at the coronation of a British monarch.

The South African soprano will be one of three soloists to perform at the coronation of King Charles III on May 6 at Westminster Abbey, in London, according to CNN.

“I feel very, very honored because it is something that has never happened before,” the 38-year-old told AFP.

“Generations from now they will read about the British monarchs… and they’ll see the name of a girl from the tip of Africa written in there – that she was actually invited by the king himself to sing at Westminster Abbey.”

Yende was born at the height of apartheid in the small town of Piet Retief to a religious family. Her closest musical reference was spiritual hymns, and she never intended a career in music until she heard opera for the first time at the age of 16.

Pretty Yende will be the first African soloist to perform at the coronation of a British monarch. (Photo by Dario Acosta)

“Hearing this music and the power of it, sounded like something supernatural. I did not believe human beings could do it,” she recalled to CNN.

“I remember recording it and imitating it,” she said. “I would play the recording the whole day. My gosh, my family were in trouble, because I wouldn’t stop practicing and shouting.”

Yende started her meteoric rise in the opera world while still a student at the University of Cape Town. In 2011, she graduated from the Young Artists program at the Accademia at the Teatro alla Scala, in Milan, Italy, and, since then, she has been in demand at opera houses throughout the world.

The past decade has not always been lined with roses, however. Yende said she has had to battle opera’s Eurocentric homogeneity and hopes to use her talent and success to break stereotypes.

“The biggest challenge has always been being the different one in the room. When I was the first Black in the Accademia of La Scala it was a bit uncomfortable,” she remembered.

“Sometimes I would enter the rehearsal room, and I could see in the room looks like, ‘Why are you here?’ And I would just smile. But once I start making music, all of us in that room agreed that I’m not there by mistake.”

Charles III, an avid patron of the arts, saw Yende perform at Windsor Castle a year ago during the Royal Philharmonic Orchestra’s 75th anniversary gala.

And now, the South African soprano will perform “Sacred Fire,” a new piece by British composer Sarah Class, before a worldwide audience of millions.
“It’s a dream come true, because when I found out that I have this incredible gift I wanted to share it with as many people as possible,” Yende said. She added, ““I know that my life will no longer be the same.”

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