Connect with us

Business

OPEC At Brink of Ending Oil Price War, Awaits G20 Meeting

Published

on

In a move to save the oil industry, facing the biggest crisis in its history, OPEC and Russia have agreed on new production cuts, with the OPEC+ group agreeing to eliminate 10 million barrels of crude per day for an initial two-month period to save a glutted oil market.

Mexico is the only country in the extended OPEC+ group to have refused to take part in the cuts at the same level as others, its energy minister Rocio Nahle proposed a reduction in national output of 100,000 barrels per day instead of the 400,000 barrels per day requested.

Though the new OPEC+ deal is not dependent on additional cuts from outside the group to move forward, such as the United States, Brazil and Canada, OPEC+ is hoping for additional cuts from these and other G20 countries.

The OPEC+ production cuts will begin in May but can only proceed if Mexico participates. From July to December, overall production cuts will lower to 8 million barrels per day, followed by 6 million barrels per day from January 2021 to April 2022.

The fate of a new “OPEC++” deal, in which additional countries could sign up to production cuts, will be the focus of a virtual meeting of G20 energy ministers on Friday, with the US Energy Secretary Dan Brouillette among the global energy leaders expected to participate in the webinar. Alberta Energy Minister Sonya Savage was on Thursday’s OPEC+ call, a first for Canada.

The OPEC+ production cuts would just run through June 10, when OPEC+ is set to meet again. Iran, Libya and Venezuela will be exempted. Saudi Arabia and Russia would bear the brunt of the cuts.

Brent crude was down 4 percent at market close, losing pace from a nearly 11 percent rally before the details of the deal were announced. Brent closed at $31.48 per barrel.

Free market or bust?

Thursday’s deal would bring an end to the oil price war between Saudi Arabia and Russia, which started March 8 in an effort to regain market share captured by United States shale oil production in recent years. In moving to end the oil price war, both Saudi Arabia and Russia have called on the participation of global producers outside the OPEC+ group to join production cuts.

That issue is set to be addressed at Friday’s virtual G20 meeting, but the United States has balked at the idea of officially joining cuts, citing an open market and anti-trust laws.

However, President Donald Trump has indicated the US, a top oil producer along with Russia and Saudi Arabia, will naturally see sharp declines in oil and gas production with the steep drop in oil prices and drop in global demand. Trump has radically changed his position on OPEC, as the oil market collapse foreshadows a collapse of US shale.

“Obviously for many years I used to think OPEC was very unfair,” Trump told reporters on Wednesday. “I hated OPEC. You want to know the truth? I hated it. Because it was a fix. But somewhere along the line that broke down and went the opposite way. … We have a tremendously powerful energy industry in this country now, No. 1 in the world, and I don’t want those jobs being lost.”

The US shale industry, however, remains sharply divided on official production cuts — with majors like Exxon and Chevron calling for a free market and smaller independents more eager to join production cuts.

In 2019, US oil production averaged 12 million barrels per day.

But production is now projected to fall by at least 15 percent in the second quarter of 2020 and another drop of 12 percent in the third quarter, according to the EIA.

Several companies in the Permian Basin are asking for a hearing with the Texas Railroad Commission, the regulator, to determine mandatory production cuts.

As of yet, no such meeting has been called.

Global pandemic coincides with price war

Oil prices plummeted in recent weeks, as the oil price war between Russia and Saudi Arabia, which began on March 8, was amplified by an unprecedented drop in oil demand caused by the COVID-19 pandemic.

About 40 percent of the world’s population has been ordered to stay home to stem the spread of COVID-19, according to the Energy Information Agency, and unforeseen impacts on travel, tourism, manufacturing, and joblessness have since seen global oil demand plummet by about 30 percent, from over 100 million barrels per day to under 85 million barrels per day.

The virtual OPEC+ meeting, in fact, was an indicator of the new reality, as many of the world’s top oil and gas leaders joined the meeting from their home countries.

Brent crude was averaging $55.70/barrel in February, before the oil price war and the impacts of COVID-19 were known.

Ahead of the meeting on Thursday, Brent crude was trading at $33.41 and WTI at $25.92. Both Brent and WTI have reached their lowest level in years, with Brent hitting $22.76 per barrel in March, its lowest price since November 2002.

“The global spread of the Coronavirus is creating a demand shock that is impacting already fragile world energy market balances. Markets are continuing to assess the yet unknown risks of COVID-19 to the global economy as the disease continues to suppress economic activity,” said Dr Sun Xiansheng, Secretary General International Energy Forum, in a statement.

As demand for oil and the price of oil has declined, storage capacity is reaching its limits. In just a few weeks, analysts predict oil production may be shut in due to a lack of global storage capacity.

“Low oil prices combined with the inelastic nature of refined product supply and demand is usually a boon to refining margins. However, COVID-19 also impacts downstream profitability caused by erosion in demand. The combination of sustained shocks to supply and demand will cause product inventories to rise to new highs,” Dr Sun continued.

Impact on Africa

Africa has a lot to lose from a sustained low oil price, in addition to the damaging economic impacts of COVID-19.

Economic powerhouses like Nigeria and Angola, which reportedly had difficulty selling oil production ear-marked for export in April, could take especially hard hits, made especially vulnerable by a lack of economic diversification.

As a whole, the continent’s oil producers have pushed for cooperation at the OPEC+ meeting, urging for a stabilized oil market and reduction in production.

In a joint statement, the Africa Petroleum Producers Organization called for OPEC and non-OPEC members to cooperate in stabilizing the oil market.

“We reiterate our support to OPEC and non-OPEC member countries as well other global oil producers in their concerted efforts at ensuring long term stability of the global oil market. Furthermore, we urge the G20 countries to offer assistance to Africa as we struggle to ward off this pandemic and price stabilization process in the oil markets,” said H.E. Foumakoye Gado, President of the Council of Ministers of APPO and the Minister of Petroleum of Niger.

Timipre Marlin Sylva, the Minister of State for Petroleum Resources of Nigeria, also urged for cooperation heading into Thursday’s meeting.

“The driving force of our OPEC policy is first the stability of our national economy as well as the stability of the global economy which is heavily dependent on OPEC and its strategic partners, popularly referred to as OPEC+. Nigeria, like the rest of the world, has been hit by the Global Pandemic, COVID-19, and is prepared to join the rest of the world in making the necessary sacrifices needed to stabilize the crude oil market; and to prevent what is likely to be a major global economic meltdown,” said Sylva.

NJ Ayuk, Executive Chairman of the African Energy Chamber, supported the deal and advocates for further cuts.

“The OPEC deal is a good one. We can work with it for now. African countries will not recover from COVID-19 and the associated economic difficulties without a strong energy sector. The oil industry helped the continent pull itself out of the last economic recession of 2008. African businesses and workers will be happy to see the end to the price war and to maintain an industry that meets their hopes and aspirations. A global cut would be better and everyone needs to put some skin in the game, especially our friends from the US, Canada and Norway.”

South Sudan, a member of the OPEC+ cooperation, backed the production cuts.

“South Sudan believes that market volatility is negative for every player in the market and hurts our ability to attract new foreign investment, diversify our economy and promote peace,” stated Minister of Petroleum Hon. Puot Kang.

“South Sudan is focused on boosting exploration and opening up new oil and gas fields, and the current scenario hampers our growth targets significantly.”

The International Monetary Fund is already working closely with African countries to stave off recessions and an economic collapse.

Governments throughout the continent are calling for debt relief as the global economic crisis deepens.

The World Bank and the IMF have both expressed support for debt relief as less developed economies navigate the COVID-19 fallout.

Advertisement
1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

I&M Bank Acquires 90% Stake In Uganda’s Orient Bank

Published

on

I&M Holdings, a Nairobi Securities Exchange-listed firm has stormed into the Ugandan financial market in style by acquiring a 90% stake in Orient Bank Limited, Taarifa reliably reports.

“This acquisition is expected to give the group greater capacity to grow profitably, through extending our network to our regional customers,” I&M’s executive director Sarit Raja Shah said in a statement.

Since 2014, I&M had been eyeing the Ugandan market in pursuit of growth and regional diversification strategy that is also seen among rivals like KCB Group, Equity Group and DTB Group.

The Kenyan banking multinational bought shares from Orient Bank’s shareholders Hemlata Karia, Jay Karia, Morka Holdings Limited, Zhong Shuang Quan, Cornerstone M8 Limited and the bank’s founder Ketan Morjaria.

This deal adds to I&M’s regional banking operations comprising Kenya, Rwanda, Tanzania and Mauritius.

Morjaria, who held a 7.91% stake before the transaction, sold part of his shares and retains a 5.5% equity in the subsidiary.

Alemayehu Fisseha did not sell his holdings and also retains a 4.5% interest in the bank. “This acquisition marks a great milestone in the history of Orient Bank,” Dr. Morjaria said in a statement.

“We are proud to be integrating into a regional group like I&M Holdings Plc and this synergy will allow our customers to benefit from more seamless and superior banking products whilst continuing our tradition of trust.”

I&M had said that the U$33.5million purchase price would be subject to further adjustments on account of several factors including exchange rate fluctuations and the amounts raised from the sale of the Ugandan bank’s property in Kampala (Orient Plaza).

I&M said of the Orient Bank buyout in a circular to shareholders, “The combined group will be better able to serve the needs of regional and global customers, and in turn promote regional trade flows.”

Continue Reading

Business

Mining Delivers US$385M To Ivorian, Ghanaian Economy In 2020

Published

on

Perseus Mining Limited (TSX & ASX: PRU) (www.PerseusMining.com) has released its CY20 Sustainable Development Report. The report details the company’s progress over the past 12 months in delivering on its commitment to responsible mining operations in Côte d’Ivoire and Ghana, including an overall economic benefit to host countries totalling about USD$385M.

As part of its longstanding commitment to the communities in which it operates, Perseus reported increasing community investment by 71% to around US$1.9M in CY20, funding critical health and education infrastructure projects for local communities. Additionally, Perseus announced it had increased its proportion of local procurement from 66% in CY19 to 78% in CY20, totalling US$287M, and further expanded its employment of local populations, with 96% of its current workforce local to Ghana and Côte d’Ivoire.

Jeff Quartermaine, Managing Director & CEO of Perseus said:

“Sustainability is deeply rooted in Perseus’s culture and operations and has had a large part to play in our resilience during this challenging year. We believe that responsible gold mining can play a key role in sustainable development, and that investing in our employees and our communities to create enduring social value will remain a guiding force in our growth path and future business operations. I am proud of my team’s effective response to the pandemic which successfully safeguarded our operations as well as our people, enabling us to deliver our Yaouré mine in Côte d’Ivoire this year ahead of schedule. Our approach to sustainability has continued to mature as our business has grown, and in the coming years we look forward to expanding our ESG offering and delivering greater impact across Côte d’Ivoire and Ghana.”

Jessica Volich, Group Sustainability Manager at Perseus said:

“Despite the challenges the past year has brought, Perseus’s sustainability agenda has continued to strengthen and evolve alongside its expanding operations. Our wide-ranging efforts and engagement with our local communities and host governments has enabled us to create shared sustainable value for all our stakeholders. We are committed to strengthening these relationships in the coming years as we endeavour to generate socio-economic value for our people, communities and host countries.”

In CY20, Perseus has enhanced its disclosure on sustainability-related risks and opportunities by aligning with the key reporting frameworks used by our stakeholders. These include the World Gold Council Responsible Gold Mining Principles, Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) and the Task Force on Climate Related Financial Disclosures (TCFD).

Highlights of the report include:

Economic and Social Contribution

  • Total economic contribution of US$385M in CY20 to Ghana and Côte d’Ivoire
  • Increased community investment by 71% (from CY19) to around US$1.9M in CY20, funding critical health and education infrastructure projects for local communities and providing COVID-19 support
  • Creation of new health clinics near Sissingué to improve health outcomes for the ~27,000 residents of the local communities
  • Increased in-country employment, with over 96% of total employees from host countries
  • Local procurement spend of $287M, an increase from 66% in CY19 to 78% in CY20
  • Held 587 consultations with local communities
  • Paid >US$69M in taxes, royalties, and duties to Government

Health & Safety performance:

  • Maintained record of zero workplace fatalities and reduced injuries
  • Implementation of comprehensive measures and protocols to prevent introduction and spread of COVID-19 and maintain business continuity

Environmental stewardship:

  • Re-use of 12,495,163 KL of water
  • Water intensity of 7.46M3/oz gold produced, benchmarked ahead of peers
  • Enhanced tailings disclosures in line with the Investor Mining and Tailings Safety Initiative, and completed independent audits of all our Tailings Storage Facilities (TSFs)

Governance

  • Worked with independent sustainability risk experts, KPMG, to refresh sustainability materiality analysis and conduct deeper analysis of sustainability risks and opportunities, and start development of a 3-year sustainability roadmap
  • Announced appointment of a new Director by the end of FY21 to enhance sustainability skills of the Board
  • Release of the first Modern Slavery Statement to address potential human rights risks in Perseus’ global supply chain

Future ambitions

  • Establish a 3-year sustainability roadmap, and enhance social value and sustainability risk management through updates to the Risk Management Framework and policy standards
  • Establish the Yaouré Community Development Fund in FY21
  • During FY21 and FY22, Perseus will complete and commence implementation of our biodiversity plan at Yaouré in Côte d’Ivoire mine site in and establish our site nursery, to be staffed by local community members
  • Explore strategic opportunities for community partnerships in Côte d’Ivoire and Ghana
  • Achieve full alignment with the World Gold Council Responsible Gold Mining Principles by FY23
Continue Reading

Business

How A Career In Public Relations Helped Shape An African Royal

Published

on

To some, it might seem like an unusual career trajectory, but for Ewetse Khama, working in the Public Relations industry in Africa has been the perfect preparation for the next step in his unique journey.

From today, Ewetse is stepping down from his role at APO Group, the leading pan-African communications consultancy and press release distribution service, to serve his country and his people.

This year, Ewetse’s father, Sekgoma Tshekedi Khama, retired from active duty in the Bamangwato tribe. This made way for the eldest son, Ewetse to assume his father’s role as a Kgosi – a Batswana term meaning ‘Chief’, ‘King’ or ‘Elder’ – in the Khama Family, one of Botswana’s most prominent royal families.

The Khamas have a long and illustrious history in Botswana. Ewetse’s paternal uncle, Sir Seretse Khama, served as the country’s first President after independence in 1966, and was the subject of a Hollywood blockbuster – A United Kingdom – about his marriage to English woman Ruth Williams. Sir Seretse’s eldest son, Lieutenant General Seretse Khama Ian Khama was Botswana’s 4th President from 2008-2018.

Botswana is one of the most peaceful countries in Africa, which Ewetse attributes partly to the role that traditional leaders play as a conduit between government and the people, especially in promoting harmony and understanding. 

That might be one of the reasons the PR industry has been such a good fit for Ewetse, helping prepare him for the big challenges that lie ahead.

“I felt that I needed to do things for myself and forge my own career, instead of relying on my name or status,” Ewetse says. “As a Khama, I had so much choice in life because many doors were always open to us, I could do or be anything I wanted. But I have always felt strongly about communications and working with people, so PR seemed like the perfect choice.”

Working within the PR Agency division of APO Group has given Ewetse a grounding, and a sense of normality. It has also broadened his horizons internationally, and given him new perspectives on Africa after being educated in Europe. Ewetse believes his PR career – and his time at APO Group – will help make him a better leader.

“I’m a good listener, which is essential in PR. You listen to what somebody has to say, then you help them develop their ideas, and connect with their audiences. The key appeal to me is that Public Relations is really about creating opportunities for people.” 

Ewetse’s work with APO Group has certainly helped him do that. He has offered a guiding hand to many multinational organizations looking to navigate the diverse African media landscape. His experience and local knowledge has enabled those companies to succeed in markets that are often difficult to crack. Like all his APO Group colleagues, Ewetse is passionate about Africa, and provided customers with ‘on-the-ground’ networking and support.     

As APO Group Founder and Chairman, Nicolas Pompigne-Mognard explains: “Not everyone in our team is from African royalty! But they are all deeply attuned to the people, country and region in which they live and operate. Ewetse’s extraordinary story epitomises our commitment to local expertise, and is also a testament to APO’s talent pool across Africa.”

APO Group holds a unique position in the Public Relations industry in Africa. Formerly known as the African Press Organization, it has been providing content to media in all 54 African countries since 2007. Journalists in Africa know and trust APO Group, making them the perfect partner for companies looking to develop their presence on the continent.

Ewetse is now looking to bring the communications skills he honed in the PR industry into his new role as a Kgosi – a Batswana term meaning ‘Chief’, ‘King’ or ‘Elder’ – where his responsibilities include fostering local consensus and governance while also promoting social welfare and the economic empowerment of disadvantaged groups.

“My time at APO Group has been an important part of my career, and I am proud of the work we have done to help our multinational clients and drive business into African economies. I have great memories of the people and the experiences I’ve enjoyed along the way. They will stand me in good stead as I take this next exciting step!” 

Even though Ewetse has now moved on to serve his community and country, he will be remembered fondly by his former colleagues.

“Ewetse will always be a valued part of the APO Group team – a colleague and a friend,” Nicolas Pompigne-Mognard says. “We will miss him, of course, but APO Group’s loss is Botswana’s gain. His nation is lucky to have him. I am grateful for the fact that, thanks to our fantastic team, our clients across Africa will continue to receive a royal standard of quality service!

Continue Reading
Advertisement
Advertisement

Trending