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OPEC+ Cuts production, saves Oil Industry from a breakdown

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OPEC+ Cuts production, saves Oil Industry from a breakdown

In a watershed moment for the oil and gas industry, OPEC and its partners in the OPEC+ group concluded a deal on Easter Sunday that, in association with efforts from the G20 and International Energy Agency, could see up to 20 million barrels of oil per day separated from a severely oversupplied oil market. The deal is set to increase the oil price and render some much-needed stability for an industry in crisis.

Initially announced Thursday, the agreement was delayed as Mexico refused their share of production cuts. The original OPEC+ deal would have seen a cut of 10 million barrels of crude per day from an October 2018 baseline, for an initial two-month period. With OPEC+ letting Mexico off the hook, the official OPEC+ cut now stands at 9.7 million barrels, as Mexico agrees to cut 100,000 barrels per day instead of 400,000 barrels per day.

In reality, however, the OPEC+ deal will cut more than the quoted 9.7 million barrels, since current production levels are much higher than the October 2018 baselines used to calculate the production cuts. The deal sees Russia and Saudi Arabia absorbing the brunt of the cuts, each agreeing to cut their production down to 8.5 million barrels per day. Saudi Arabia’s production stood at 12.3 million barrels per day, and Russia was producing 11.29 million barrels of oil per day in March. Both countries, however, used 11 million barrels per day as their baseline in the deal.

Mohammed Barkindo, OPEC Secretary General

“These production adjustments are historic. They are largest in volume and the longest in duration, as they are planned to last for two years. We are witnessing today the triumph of international cooperation and multilateralism which are the core of OPEC values,” said Secretary General of OPEC H.E. Mohammed Barkindo. Barkindo also noted that the OPEC+ deal paves the way for further collaboration with the G20.

In a meeting on Friday, the G20 nations also agreed to take action to stabilize the market. The United States, for example, is set to use the Strategic Petroleum Reserve to store vast quantities of oil. Additionally, the US will see production cuts of at least 2 million barrels as the market responds to a lack of demand. The US has also reportedly offered to take on an additional cut of 300,000 barrels per day on Mexico’s behalf, although the details of how such a deal would play out have not been released.

The OPEC+ group is expected to request the G20 to cut over 3 million barrels per day of production. The G20 energy ministers agreed Friday to create a task force to monitor the situation and formulate strategies. The Texas Railroad Commission, the agency that regulates the state’s oil and gas industry, is also scheduled to meet on Tuesday to discuss regulating formal cuts, though the US has largely maintained that the free market will determine oil production cuts.

US President Donald Trump tweeted his support for the OPEC+ deal on Sunday.

“This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia,” he said.

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Finally, in a reported, but not confirmed, side deal, Saudi Arabia, Kuwait and the United Arab Emirates could agree to reduce production by an additional 2 million barrels of oil per day.

OPEC has “Breathed Life” into Africa

The historic production cuts provide a much-needed financial boost to Africa’s oil and gas producers, including Nigeria, Angola, South Sudan, Sudan, Gabon, Congo-Brazzaville

and Equatorial Guinea, as the sudden drop in oil and gas prices coincided with the COVID-19 health crisis and the economic repercussions of closing businesses and restricting movement to deal with the pandemic.

Minister of State for Petroleum, Chief Timipre Sylva

In a statement, Nigeria’s Minister of State for Petroleum Resources, Hon. Chief Timipre Marlin Sylva, said he expects the oil price to rebound by $15 per barrel in a short-term outlook.

“This also promises an appropriate balancing of Nigeria’s 2020 budget that has been rebased at $30 per barrel,” he said in a statement.

NJ Ayuk, Chairman of the African Energy Chamber, lauded the efforts of the OPEC+ deal, as a stable oil market will provide economic relief and save jobs throughout the continent.

“OPEC has hit a home run,” Ayuk said. “OPEC has breathed life and given hope to African nations, oil workers, investors and the African business community. We need to focus on exploration soon again. Now we have the ball; we need to run with it and start the process of bouncing back. We need to defend the African oil industry like a junkyard dog in the face of a hurricane.”

South Sudan, a member of the OPEC+ alliance, also welcomed the deal, said the country’s Minister of Petroleum Hon. Puot Kang Chol.

“South Sudan is East Africa’s only producing country. Our production was over 350,000 barrels per day before the civil war. At the present moment, we are producing about 185,000 barrels per day with a target on attracting more investment into the oilfields to get our nation to 300,000 barrels per day. The current price war and coronavirus has affected our economy,” he said.

“We welcome all efforts to stabilize the oil market and South Sudan will continue to play its role. Our government will continue doing its utmost best in making the oil production and fighting the Coronavirus a priority and we will continue collaborating with all our partners,” he added.

OPEC+ Cuts Respond to Slashes in Demand

Each nation, aside from Saudi Arabia and Russia, which are both cutting substantially more, is expected to cut 23 percent of production from May to June. Iran, Libya and Venezuela are exempted from the production cuts, and Mexico is only cutting 100,000 barrels per day.

After this initial two-month period, overall production cuts will lower to 8 million barrels per day from July to December and then lower to 6 million barrels per day from January 2021 to April 2022. The OPEC+ group will meet in July to discuss further action, if needed.

With about 40 percent of the world’s population ordered to stay home to stem the spread of COVID-19, demand for oil and gas has decreased by about 30 percent, from over 100 million barrels per day to under 85 million barrels per day, according to the Energy Information Agency.

The International Energy Agency, which called for the G20 meeting of energy ministers on Friday, argued the market conditions were too much for OPEC+ alone to handle.

“The extreme volatility we are seeing in oil markets is detrimental to the global economy at a time when we can least afford it,” said Dr. Fatih Birol, Executive Director of the IEA.

“Today’s oil crisis is a systematic shock that threatens global economic and financial stability. It requires a global answer. That is why the G20 can be an indispensable forum for decisive leadership when it is urgently required,” he added.

Brent crude was averaging $55.70 per barrel in February, but, with an oil price war and the impacts of COVID-19, 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.

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

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Rivers State Govt. Approves N5bn for Development of Medical Facilities

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Rivers State Govt. Approves N5bn for Development of Medical Facilities

The Executive Council of the Rivers State Government on Wednesday approved over N5 Billion Naira required for the revamping of the Prof. Kersley Harrison Hospital and the Dental and Maslofacial Hospital located in Port Harcourt.

Speaking to journalists after the meeting, Commissioner for Health, Princewill Chike said, the approved sum will be spent on renovation, rehabilitation and installation of medical equipment at the health facilities.

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The Commissioner said the work at the Prof. Kersley Harrison hospital is expected to last for a period of thirteen months and when completed, it will be an affiliate of the Rivers State University Teaching Hospital, to add to the training of medical doctors and medical personnel.

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Chike also speaking about the approval given for the revamp of the Dental and Maslofacial Hospital, said when completed it will also be affiliated to the Rivers State University Teaching Hospital for the training of medical personnel.

The Health Commissioner who equally lamented that the figures Covid-19 cases in the state has continued to grow, called on residents to avoid crowdy area, wash their hands regularly and also wear their facemasks.

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Akwa Ibom Governor Signs the Anti-Grazing Bill into Law

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Akwa Ibom Governor Signs the Anti-Grazing Bill into Law

Akwa lbom State governor, Mr Udom Emmanuel, has signed into Law a bill to prohibit open rearing and grazing of livestock and provide for the establishment of ranches in the state.

The Speaker, Aniekan Bassey, with the Attorney General and Commissioner for Justice, Uko Udom (SAN), presented the bill for signing on Wednesday at the State Executive Chambers, in the Governor’s Office, Uyo.

The governor, after signing the bill into law, stated that the new law was no respecter of persons irrespective of status or calibre.

He instructed relevant authorities of government to ensure that, the bill is implemented and enforced to the letter with strict compliance, stressing that, culprits must be brought to book accordingly.

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The new law will promote modern techniques in animal husbandry, prevent the destruction of farms by wandering cattle while reducing clashes and killings between herders and farmers in the state.

It will also promote international best practices in livestock administration, regulation and control in the state, among other things.

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Doctors Strike: Court Fixes Sept 17 For Ruling, As Parties Agree to Negotiation

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Court Fixes Sept 17 For Ruling, As Parties Agree to Negotiation

The National Industrial Court has fixed September 17th to rule on the application of jurisdiction and contempt of court, filed by both the Federal Government and the Association of Nigerian Resident Doctors.

At the resumed hearing on Wednesday, counsel to the striking resident doctors, Femi Falana (SAN), told the court that he had an application challenging the jurisdiction of the court to entertain the case.

The counsel to the Federal Government, Tochukwu Maduka (SAN), however, pointed out that the issue of contempt of the court, by the resident doctors, should be heard first, before that of the jurisdiction.

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He added that there was an order by the court that the resident doctors and the Federal Government should suspend all hostilities and maintain the status quo, but the doctors did not obey the court order.

According to him, the strike action, embarked upon on August 2 by the resident doctors has wreaked untold suffering on the citizenry, amounting to numerous deaths of persons.

After listening to the submission of both parties, Justice Bashar Alkali fixed September 17 to rule.

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