As oil prices continue on the downward slide, Nigerian oil firms may be producing at up to $5/barrel loss, as average production costs for independent and marginal field producers is between $30 and $35/barrel.
Oil prices, yesterday, resumed their free fall, with Brent crude, similar to Nigeria’s sweet crude grade, falling 2.6 per cent to $31.34 a barrel following a 10 per cent rise on Friday, while U.S. oil shed 95 cents to $31.24.
To compound the producers’ woes, a significant proportion of what is produced is lost to oil thieves and pipeline vandals, which they insist are even more dangerous than the bearish run oil prices
Industry chiefs, who spoke exclusively with Vanguard on phone, argued that the turbulence in the international oil market deserves urgent attention.
Specifically, they insisted that the Federal Government needs to be talking with Nigerian producers very fast, if it must save indigenous companies from running aground and plunging the economy into deeper crisis than it is in already.
Impact on producers
Speaking on the impact of the oil crash on the producers, Chairman, Petroleum Technology Association of Nigeria, PETAN, Mr. Emeka Ene, said:
“Current price is below Nigeria’s average of between $30 and $35 per barrel. Most marginal field producers are producing above $30/barrel, and with pipeline vandalism activities, costs will shoot up by another $10/barrel, so oil production now is not sustainable.”
Ene, who spoke against the backdrop of oil crashing to 13-year lows of below $28/barrel last week, noted that the bearish run may soon fizzle out, whether shale or conventional oil is being produced at above $25/barrel. As such, the southward run is not favourable to any producer.
He also revealed that “a lot of Nigerian companies are out of work because they cannot compete with the multinationals, so government needs to have a serious talk with stakeholders in the industry.”
Oil theft, pipeline vandalism
Whether oil prices go bullish soon or not, other stakeholders feel that the benefits of the rise will be lost on Nigeria, if the government does not deal decisively with the twin incidence of pipeline vandalism and oil theft.
The President, Nigerian Association of Petroleum Explorationists, NAPE, Mr. Nosa Omorodion, maintained that “government needs to address the issue of oil theft and pipeline vandalism very fast because, even if price stabilises tomorrow or whenever, we will still not be able to reap the full benefits of that rise.”
He further argued that “oil theft and vandalism remain recurring and very worrisome because these issues are much bigger than oil slide, which is mostly driven by speculation, while these activities affect planning and are more cankerous than price slide. Operators are risking their assets including human resources to produce the oil, only to have it stolen thereafter.”
Against this backdrop, Omorodion, whose association is responsible for finding and producing oil, revealed that NAPE is planning a national seminar this month end to holistically address the issue of oil slide.
He said: “We are going to assess the length and breadth of the oil and gas industry because the price slide is not only affecting petroleum, but also other sectors of the economy.”
Apart from the impact on cost of production, the NAPE boss noted that “The current price is affecting so many things, as nobody is drilling for exploration now, and no one is thinking about fancy technology to boost production. Also, exploration will suffer as no company is exploring for new wells to grow reserves, and many small scale producers, which are mostly Nigerians, will shut down.”
Going forward
Currently, most producers, both OPEC and non-OPEC including the U.S., Saudi Arabia, Russia, Iraq and a host of others are producing at optimal capacities, which indicates that the downward glide may not let up soon. Also, some analysts have predicted that price may glide to below $20 or even $10/per barrel before rebounding.
Furthermore, with Iran’s oil also up in the market and expected to be ramped up systematically, compounded by the melt down in demand being fueled by the crisis in China, crude prices are facing more pressures. But producers recognise that the global economy is in need of some succour but differ on the best ways to go about it.
Noting that Nigerian service companies, who are the hardest hit by the crashing oil prices and provide about 650 value services across the industry, Ene insisted that Nigeria has the weapon in these companies to cushion the market turbulence but has not fully appreciated it.
According to him, “Nigeria has a thriving local oil industry, and if properly supported, can push down cost of production to $10 per barrel. About 10 to 15 years ago, industry cost was below $10 per barrel and nothing much had changed.
On his part, Omorodion believes that now is the time for oil companies to be at the most cost efficient by prioritising between wants and needs, while government becomes more fiscally disciplined and diversifying the economy.
But Ene argued that the solution is not in prescriptivism, like the majors calling for as much as 40 percent cuts in cost of services thereby killing off the companies, adding that government needs to identify and reduce unrealistic economic toll gates.
In his opinion, “The whole system is heated up, and cost of borrowing is very high. So far, conversation has been restricted to major operators and has not included the service companies driving operations in the industry.
“If we must produce oil at $10/barrel, government needs to be talking to Nigerian companies, who have invested in people and technology and are not repatriating their profits.”
Furthermore, he noted that a lot of the systemic costs being borne by indigenous firms contribute to the high cost of production, such as what he described as “Federal Government agents charging unrealistic charges like asking for $10million for permits need to be looked into.”
Vanguard
Tuesday, January 26, 2016
Monday, January 25, 2016
Video - Rat poison sales surge in Nigeria as Lassa fever spreads
Sales of rat poison have risen in Nigeria following an outbreak of Lassa fever that has killed at least 76 people and sparked fears of contagion across the country.
In the northern city of Kano, the capital of one of 17 states where the haemorrhagic virus has been recorded, there have been “unprecedented” purchases of the pest control product.
The head of the city’s chemicals traders, Shehu Idris Bichi, said sales have increased four-fold since the outbreak was announced this month.
“Traders are doing brisk business because people are making unprecedented purchases of the product to rid their homes of rats that cause the disease,” he said.
Abubakar Ja’afar, who works in Kano’s largest market, said he had never seen sales so high in his 20 years in the trade, with traders in other cities reporting similar increases.
“I used to get between five and 10 clients a day but now I get at least 30 customers … people you don’t expect because of their social status,” he said. “Lassa doesn’t discriminate between the rich and the poor.”
Vendors using megaphones and selling their wares on carts have become commonplace.
“I was making up to 500 naira [£1.75] a day but now I make between 2,000 naira and 4,000 naira every day,” said one, Awwalu Aminu, 40, in Kano.
Nigeria’s health minister, Isaac Adewole, said this week that 212 suspected cases have been recorded since November last year, when the first one was reported; the virus is endemic in rats in west Africa.
Outbreaks are not uncommon and the US Centers for Disease Control and Prevention estimates there are 100,000-300,000 infections in west Africa every year, with about 5,000 deaths.
In 2012, there were 1,723 cases and 112 deaths in Nigeria. Last year, 12 people died out of 375 infected, according to the Nigerian Centre for Disease Control. The virus is spread through contact with food or household items contaminated with rats’ urine or feces.
Africa’s most populous country was praised for its containment of Ebola in 2014, despite initial fears it could spread rapidly in densely populated urban areas after the first case in Lagos.
But while the government maintains it has the spread of Lassa under control, specialists have voiced concern about under-reporting and Nigeria’s capacity to deal with the outbreak.
The first case dates back to August in the north-western state of Niger but was not detected until late last year. Public awareness campaigns have been mounted and surveillance ramped up of primary and secondary contacts of those with the disease.
The government has criticised a “culture of silence” and vowed sanctions against medical professionals who fail to inform the authorities of suspected cases.
Lawan Bello used to ignore rats in his home, bothering more about the damage the rodents could cause to clothing, furniture and food. But the latest outbreak – and the wider publicity about its spread – has changed his attitude.
“Every few days I buy rat poison and use it in my home to kill rats and I will continue until my house is free of them,” he said. “I’m scared of Lassa and that has made me hate rats the most.”
Killing rats may be one solution to the problem but effective waste disposal has long been a major problem in Nigeria’s big cities.
“Everywhere you turn you see heaps of refuse which provides a breeding ground for rats,” said Idris Musa, a community health worker in Kano. “Rats breed fast and it is very difficult to beat rats’ breeding rate with rodenticide.”
In 2007, Kano was producing 2,000 tonnes of rubbish every day but refuse collectors could only clear 800 tonnes, according to the city’s refuse disposal agency.
Guardian
Video - Nigerian government struggling to resettle people affected by Boko Haram
The Nigerian Government is busy reconstructing the region after years under the Boko Haram insurgency. Authorities are trying to resettle millions of people displaced by the violence, with refugees trying to build a new community.
iROKO to start financing Nollywood productions after raising $19 million
iROKO, an online entertainment platform that targets audiences in Sub-Saharan African countries, plans to strike more deals in Nigeria’s booming movie industry after securing $19 million in funding from French premium cable company Canal+ and Kinnevik, a returning investor.
That amount is divided into $12 million of capital funding, which will be used to develop iROKO’s business and technology; and $7 million that is not from equity or debt financing and earmarked solely for several years of content development deals with studios. iROKO has now raised $34 million since it launched in September 2011.
Founder Jason Njoku tells TechCrunch that this is likely iROKO’s final fundraise. The company doesn’t make its subscriber numbers public, but it expects to generate positive cash flow by the end of this year.
“We want to stay disciplined in this current funding environment to achieve that, but at the same time not limit how we grow our product engineering teams in New York and Lagos,” says Njoku. The platform, which is accessible through a website or Android app, currently has about 2,500 to 3,000 titles and plans to increase its catalog rapidly over the next month.
Njoku was inspired to create the platform after he moved into his mother’s London home and saw that she had switched from watching British soap operas to Nollywood movies. Nollywood is a nickname for the hundreds of small studios in Nigeria that create thousands of movies a year. According to Fortune, Nollywood was a $3 billion industry in 2014, putting it ahead of Hollywood in terms of volume, and just behind India’s Bollywood.
Despite its massive output and popularity, Nollywood movies and shows were hard to find—in London, Njoku had to hunt down VCDs for his mother in small stores.
“I went to Lagos and realized that this was a cottage industry and saw a big opportunity,” he says. “Our first distribution platform was YouTube and once we were funded it made sense for us to build our own platform.”
Warding Off Netflix
Netflix recently launched in South Africa, so the obvious question is how iROKO will compete against the streaming giant if it continues expanding throughout the continent. Its key difference is focusing on Nollywood movies, but iROKO is also focusing on tailoring its tech platform for the needs of mobile users in Africa.
While the most popular online entertainment platforms in the U.S. and Europe stream digital content, iROKO offers downloads. In fact, iROKO’s Android app—its primary product—got rid of streaming last year and replaced it with subscriptions that allow users to download unlimited films and keep them for up to a year. The company’s decision was based on how slow and expensive data is in many African countries.
“It didn’t work. It was a massive challenge. We don’t have the same engineering capability as Netflix, but the cost of streaming data was unimaginable to our customers, so we are in the process of re-encoding all our files to be between 50 to 100 megabytes,” says Njoku.
Though most movie downloads now take between two to three minutes, iROKO wants to compress them even further because many Android smartphones sold in Nigeria only have about three to four gigabytes of storage.
Furthermore, Nigeria suffers from an unreliable power grid, with blackouts a part of daily life (Njoku claims he’s never had 24 hours of uninterrupted electricity). This makes smartphone owners careful about their battery usage, another problem for iROKO to tackle.
“We are thinking about how to encode files in a way that reduces the amount of battery power used,” says Njoku. “It’s still very much a work in progress and we’re still figuring out the best approach. Dealing with significant Android fragmentation—there are phones from all sorts of Chinese and Southeast Asian OEMs, as well as a big secondary market and jailbroken phones—creates its own degree of complexity, which we are also trying to solve.”
Just as crucial as iROKO’s technology platform is the quality of entertainment. Last year, the company financed and produced about 100 hours of content with Nollywood studios and with its new funding for content deals, plans to collaborate with up to 20 studios, using data from its platform to decide what types of movies and shows (romantic comedies, high drama, and shows with Christian themes tend to do well) to produce.
Njoku wants to give Nollywood movies an organized channel for financing and distribution, since it’s often difficult for studios to secure loans from banks and government initiatives to support the industry haven’t taken off yet.
“Nollywood is incredibly fragmented, with hundreds of mini-studios, some of which have just two to three men working for them,” says Njoku. “We have dealt with a huge array of them over the past few years and our view is to bring some sort of structure to that fragmentation.”
Another of iROKO’s goals is to make Nollywood content accessible to viewers throughout Africa, even if they don’t speak English (the official language of Nigeria is used in most Nollywood films). iROKO was named after a type of tree with many branches that grew next to Njoku’s grandparents’ house in Nigeria.
As it turns out, the tree wasn’t actually an iroko, but it’s called by the same word in many Nigerian languages and symbolic of iROKO’s goal to grow throughout Africa by offering the same content in multiple languages. Njoku notes that dubbing helped Nollywood gain an audience in French-speaking African countries, so iROKO will use voiceovers in addition to subtitles to expand in West Africa. It will take the same approach for Swahili and Zulu.
“Language is the largest barrier to bringing content to people, so we are doing everything we can to localize,” says Njoku.
Tech Crunch
That amount is divided into $12 million of capital funding, which will be used to develop iROKO’s business and technology; and $7 million that is not from equity or debt financing and earmarked solely for several years of content development deals with studios. iROKO has now raised $34 million since it launched in September 2011.
Founder Jason Njoku tells TechCrunch that this is likely iROKO’s final fundraise. The company doesn’t make its subscriber numbers public, but it expects to generate positive cash flow by the end of this year.
“We want to stay disciplined in this current funding environment to achieve that, but at the same time not limit how we grow our product engineering teams in New York and Lagos,” says Njoku. The platform, which is accessible through a website or Android app, currently has about 2,500 to 3,000 titles and plans to increase its catalog rapidly over the next month.
Njoku was inspired to create the platform after he moved into his mother’s London home and saw that she had switched from watching British soap operas to Nollywood movies. Nollywood is a nickname for the hundreds of small studios in Nigeria that create thousands of movies a year. According to Fortune, Nollywood was a $3 billion industry in 2014, putting it ahead of Hollywood in terms of volume, and just behind India’s Bollywood.
Despite its massive output and popularity, Nollywood movies and shows were hard to find—in London, Njoku had to hunt down VCDs for his mother in small stores.
“I went to Lagos and realized that this was a cottage industry and saw a big opportunity,” he says. “Our first distribution platform was YouTube and once we were funded it made sense for us to build our own platform.”
Warding Off Netflix
Netflix recently launched in South Africa, so the obvious question is how iROKO will compete against the streaming giant if it continues expanding throughout the continent. Its key difference is focusing on Nollywood movies, but iROKO is also focusing on tailoring its tech platform for the needs of mobile users in Africa.
While the most popular online entertainment platforms in the U.S. and Europe stream digital content, iROKO offers downloads. In fact, iROKO’s Android app—its primary product—got rid of streaming last year and replaced it with subscriptions that allow users to download unlimited films and keep them for up to a year. The company’s decision was based on how slow and expensive data is in many African countries.
“It didn’t work. It was a massive challenge. We don’t have the same engineering capability as Netflix, but the cost of streaming data was unimaginable to our customers, so we are in the process of re-encoding all our files to be between 50 to 100 megabytes,” says Njoku.
Though most movie downloads now take between two to three minutes, iROKO wants to compress them even further because many Android smartphones sold in Nigeria only have about three to four gigabytes of storage.
Furthermore, Nigeria suffers from an unreliable power grid, with blackouts a part of daily life (Njoku claims he’s never had 24 hours of uninterrupted electricity). This makes smartphone owners careful about their battery usage, another problem for iROKO to tackle.
“We are thinking about how to encode files in a way that reduces the amount of battery power used,” says Njoku. “It’s still very much a work in progress and we’re still figuring out the best approach. Dealing with significant Android fragmentation—there are phones from all sorts of Chinese and Southeast Asian OEMs, as well as a big secondary market and jailbroken phones—creates its own degree of complexity, which we are also trying to solve.”
Just as crucial as iROKO’s technology platform is the quality of entertainment. Last year, the company financed and produced about 100 hours of content with Nollywood studios and with its new funding for content deals, plans to collaborate with up to 20 studios, using data from its platform to decide what types of movies and shows (romantic comedies, high drama, and shows with Christian themes tend to do well) to produce.
Njoku wants to give Nollywood movies an organized channel for financing and distribution, since it’s often difficult for studios to secure loans from banks and government initiatives to support the industry haven’t taken off yet.
“Nollywood is incredibly fragmented, with hundreds of mini-studios, some of which have just two to three men working for them,” says Njoku. “We have dealt with a huge array of them over the past few years and our view is to bring some sort of structure to that fragmentation.”
Another of iROKO’s goals is to make Nollywood content accessible to viewers throughout Africa, even if they don’t speak English (the official language of Nigeria is used in most Nollywood films). iROKO was named after a type of tree with many branches that grew next to Njoku’s grandparents’ house in Nigeria.
As it turns out, the tree wasn’t actually an iroko, but it’s called by the same word in many Nigerian languages and symbolic of iROKO’s goal to grow throughout Africa by offering the same content in multiple languages. Njoku notes that dubbing helped Nollywood gain an audience in French-speaking African countries, so iROKO will use voiceovers in addition to subtitles to expand in West Africa. It will take the same approach for Swahili and Zulu.
“Language is the largest barrier to bringing content to people, so we are doing everything we can to localize,” says Njoku.
Tech Crunch
Friday, January 22, 2016
Video - Nigeria has the highest rate of stillbirths in the world
A recent medical report has published some disturbing findings. Nigeria has the highest rate of stillbirths in the world. And most of those deaths are preventable.
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