World Proved Gas Reserves Ranking

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1 July 7, 2017 Vol.12 No.27 Editorial Team Marcel Okeke Editor Eunice Sampson Deputy Editor Joy Patrick-Akpan Kazeem Aremu Sunday Enebeli-Uzor Ugochi Chibuzor Nweke Chinemerem Okoro Research Economists Rotimi Arowobusoye Sylvester Ukut Layout/Design The Federal Executive Council (FEC), on July 05, 2017, approved a new national gas policy. The policy guideline is aimed at removing current barriers to investment and the development of the Nigerian gas sub-sector.. pg. 1 The Nigerian National Petroleum Corporation (NNPC) on June 29, 2017, signed a $700 million tripartite deal with FIRST Exploration & Production (First E&P) and Schlumberger for the exploration of two oil fields... pg. 2 The consumers overall confidence outlook moderated in Q while still remaining down beat, according to the Q Consumer Expectation Survey (CES) of the Central Bank of Nigeria (CBN)... pg. 4 GAS SECTOR UPDATE Nigeria Gets New Gas Policy, FDA To Invest $884m The Federal Executive Council (FEC), on July 05, 2017, approved a new national gas policy. The policy guideline is aimed at removing current barriers to investment and the development of the Nigerian gas sub-sector. Specifically, the Policy seeks to put in place an appropriate legislative framework for a private sector driven Nigerian gas market. The policy guidelines cover governance (legislation and regulation), industry structure, developing gas resources, infrastructure, building gas markets, etc. According to the plan, the government will set targets for market development, monitor progress and take definite and appropriate actions to reduce the country s dependence on crude oil by increasing gas exploration and facilities. Expectedly, the gas policy will serve as World Proved Gas Reserves Ranking a strategic roadmap to attracting investments needed to harness Nigeria s huge gas potentials and global gas demand. This will likely transform Nigeria from an oil-based to a gas-based industrial economy. Already, a team of French Investors, led by the French Development Agency (FDA) has set aside 1billion ($884million) for investment in the Nigerian oil and gas sector. The investors are targeting key segments of the nation s oil and gas industry, particularly gas and power infrastructural development, pipeline construction, storage facility, etc. Core Principles of the Policy The gas policy seek to set the requisite framework for Nigeria to move from an oil-dependent economy to a gas-based industrial economy. To achieve this lofty objective, the As part of efforts by the African Export - Import Bank (Afreximbank) to drive industrialization across Africa, Afreximbank has signed agreement to provide a financing facility of $1 billion to Dangote Industries Limited... pg. 5 Source: NGC 2015; Analysis: MPR Gas Policy Team 2016, WAGP = West African Gas Pipeline; GBI = Gas-Based Industries

2 Nigeria Gets New Gas Policy, FDA To Invest $884m gas policy is hinged on the following core principles: Separate activities between the government and private sector Establish a single petroleum regulatory authority Implement full legal separation of the upstream from the midstream Implement full legal separation of gas infrastructure ownership and operations from gas marketing Realise more of the LNG international downstream value, through retaining ownership of molecules and through direct international gas marketing Pursue a project-based rather than centrally-planned domestic gas development approach Make a strong maintenance and safety culture a priority Implement international best practice for environmental protection Establish strong linkages with electric power, agriculture and the real sectors Establish payment discipline throughout the energy chain Honour stability of contract terms Protect security of assets; and Ensure compliance with the Nigerian Content Act Outlook Following the approval of the National Gas Policy by the Federal Government, Nigeria is set to leverage her huge gas potentials. The country has proven reserves of 188 trillion cubic feet (tcf) of gas and currently ranks as the 9th largest gas reserves in the world. However, little effort has been made to harness this huge gas potential, with minimal investments made in the gas sector over the period. The new and robust policy, in addition to the passage of the Petroleum Industry and Governance Bill (PIGB) into law by Nigeria is Upper legislative chamber, is expected to unlock billions of dollars in oil and gas deals awaiting Final Investment Decisions (FID). OIL SECTOR INVESTMENT UPDATE Investors Stake $700mn in Nigeria s Oil Fields The Nigerian National Petroleum Corporation (NNPC) on June 29, 2017, signed a $700 million tripartite deal with FIRST Exploration & Production (First E&P) and Schlumberger for the exploration of two oil fields tagged Anyala and Madu fields under Oil mining Leases (OMLs) 83 and 85, offshore Bayelsa. Under the accord, Schlumberger, the world s largest oilfield services company, will provide the much-needed capital and other resources until the discovery of first oil. According to Schlumberger, the consortium may also explore both technical and local expertise of each partner towards successful development of the oil fields. Final Investment Decision on the project is scheduled for December 2017, with first oil production expected in The scheme will likely utilise an existing Floating Production Storage and Offloading vessel (FPSO) modelled to add nearly 50,000 bbl of oil per day and 120 MMscf of gas per day. The oil deal hinges on a secured return on investment and a bank guarantee. First E&P, proposed operator of the assets, controls about 40% interest in the licenses while the NNPC stakes 60% in the remaining holdings. OML 83 and OML 85 are located in hollow waters 40 km offshore in Bayelsa State. Following the completion of full 3D seismic data for both OML 83 and OML 85 acreages, the Anyala and Madu fields would have a combined Stock Tank Original Oil-in-Place (STOIP) of around 450 million bbl and Gas Initially in Place (GIIP) of over 800 Bscf. Schlumberger is a global leader in oilfield services, with special focus on reservoir characterization, drilling, oil production and processing, among other. The oil giant has a presence in 85 countries and employs nearly 100,000 staff. The firm offers bespoke products and services, including oil field development, integrated pipeline solutions, reservoir performance analysis, among others. 2

3 Investors Stake $700mn in Nigeria s Oil Fields Indeed, Nigeria s oil and gas sector is now attracting fresh foreign direct investments. The reasons are not farfetched; Oil prices have rebounded above the 45 dollar mark in recent months, riding on the back of the extension of Organization of the Petroleum Exporting Countries (OPEC s) output cut in March this year. The country has also ramped up oil production to nearly million barrels per day in June, up from an average of 1.6 million barrels recorded in the corresponding year, according to the Federal Ministry of Petroleum Resources. The federal government has in recent times intensified efforts to improve its ranking on the ease of doing business index. Crude Oil Price Movement Opportunities Could markedly boost Nigeria s foreign exchange earnings Could significantly reduce liquidity squeeze at the interbank FX market May significantly improve local content development in the sector Could restore foreign investors confidence in the Nigerian oil and gas sector Challenges Non-passage of the remaining Petroleum Industry Bills (PIBs) Multiple exchange rates of the Naira against the greenback Red tape in the civil service NNPC still owes as much as $6bn in JV cash call arrears. There is a need to incorporate environmental and social (E&S) impacts assessment in the oil and gas deals. Outlook In 2017, global demand for OPEC crude is projected at 32.0 mb/d, about 0.3 mb/d higher than the 31.7 mb/d recorded in 2016, according to June 2017 Monthly OPEC s Oil Market Report. Surging output from Nigeria, Libya and the United States has kept countries in the Atlantic basin with sufficient light sweet crude, weighing on oil prices in the global markets. Therefore, crude oil price may hover below the 50 dollar mark in the 2H17. No doubt, the $700mn capital funding may enhance foreign investors appetite for Nigeria s oil and gas sector. Source: Organisation of the Petroleum Exporting Countries (OPEC) 3

4 CONSUMER CONFIDENCE INDEX Consumer Confidence Moderates in Q2; Positive in Q The consumers overall confidence outlook moderated in Q2 2017, albeit downbeat year-on-year, according to the Consumer Expectation Survey (CES) of the Central Bank of Nigeria (CBN). The index stood at -17.0, even though the proportion of respondents that are optimistic about the economy increased when compared with the corresponding quarter of While some of the respondents attributed this moderation in their outlook to increased confidence in the economy, majority ascribed the development to a decline in their net income, leading to draw-down on savings/getting into debt. The consumer outlook for the next quarter and that of the next 12 months were however, positive at 21.3 and 34.2 points, respectively. The outlook could be attributed to the anticipated improvement in Nigeria s economic conditions, expected increase in net household income, and expectations to save a bit and/or have plenty over savings in the next 12 months. Expenditure and Price Outlook in the Next 12 Months With an average index of 14.3points, more households nationwide expect some increase in their expenditure on basic commodities and services in the next 12 months. Majority of consumers expect to spend a substantial amount of their income on food and other household needs, education, savings, purchase of consumer durables, medical expenses and investment. However, they do not plan to expend on large ticket items such as purchases of car/motor vehicle and house. Also, most respondents expect the prices of goods and services to rise in the next 12 months with an index point of The major drivers include house rent, education, medical care, transport and electricity. Overall Consumer Confidence Outlooks Source: Central Bank of Nigeria (CBN) 4

5 Consumer Confidence Moderates in Q2; Positive in Q Buying, Borrowing and Exchange Rates Outlook According to the Consumer Expectation Survey, the overall buying conditions index for consumers in Q2 for big-ticket items stood at 38.2 points. This indicates that majority of consumers believed that Q2 was not the ideal time to purchase big-ticket items like consumer durables, motor vehicles, and house & lot. Similarly, buying intention index for consumer durables such as furniture, gas cooker, refrigerator, air conditioner, television and other durables in the next twelve months stood at 48.0 index points, indicating that majority of consumers believed that the next 12 months would not be an ideal time to purchase motor vehicles and house & lot. Contrarily, the buying intention index for the big-ticket items like consumer durables were above 50 points, indicating that the next twelve months would be an ideal time to purchase these items. With indices of -1.5 and 7.5 points, consumers expect borrowing rate to fall and exchange rate to appreciate in the next 12 months. Indices of Selected Economic Indicators: Next 12 Months Source: Central Bank of Nigeria (CBN) TRADE INVESTMENT UPDATE Afreximbank Offers Dangote Industries $1 Billion As part of efforts by the African Export-Import Bank (Afreximbank) to drive industrialization across Africa, Afreximbank has signed agreement to provide a financing facility of $1 billion to Dangote Industries Limited. The capital funding is in line with the Bank s strategy to facilitate the growth of intra-african trade. The terms of the Memorandum of Understanding (MoU) avail Dangote Industries Limited and its subsidiaries across Africa short and long-term credit for trade-related projects in Africa. Dangote industries - a major African conglomerate with subsidiaries across Africa - is expected to utilize this facility to boost its intra-african trade volumes by enhancing its value chains and increasing its production capacity in Nigeria and its other African subsidiaries. This in turn could boost import substitution in Nigeria. The ensuing expansion of Nigerian economy is expected to as- 5

6 Afreximbank Offers Dangote Industries $1 Billion sist the country withstand economic shocks. Dangote Industries Limited s facility of $1b makes it the largest recipient in this tranch of credit offered by Afreximbank. The Afreximbank Intra-African Trade Strategy The Afreximbank Intra-African Trade Strategy is aimed at driving industrialization across Africa and increasing intra-african trade by at least 50 per cent by Afreximbank is thus working with its partners to push up trade among African countries to $250 billion from its current level of about $170 billion. The Intra-African Trade Strategy involves expanding existing trading activities within Africa s regional economic communities, integrating informal trade into formal frameworks, reducing trade barriers and minimizing the foreign exchange costs of intra-african trade. Furthermore, according to Afreximbank about 40 per cent of intra-african trade is done in the informal sector consequently creating institutional gaps. The Intra-African Trade Strategy Afreximbank thus has a significant role to play in reducing these barriers. To achieve this, the Bank is promoting export trading companies. It is also working at resolving regulatory and policy issues through deepening its partnerships and bilateral trade arrangements. To accomplish this enormous task, the Intra-African Trade Strategy is centered on three core pillars, namely, Create, Connect and Deliver. The Create pillar forms the basis for the Bank s support of the expansion of the production, processing and export capabilities of the Nigerian and other African economies with trade finance instruments. It will also include support for import of investment goods, project finance, lines of credit, export development finance and guarantees, as well as provide project financing for the construction of infrastructure for the services sectors and for the development of industrial parks. Under the connect pillar, Afreximbank is creating initiatives aimed at providing conducive conditions that encourage the growth of exchange of goods and services. In addition, it will seek to facilitate Public-Private sector partnership as well as partnerships among institutions, agents and entrepreneurs along the trade value chain. The launch of an Intra-African trade payment platform using a clearing arrangement operated by the Bank is expected to greatly reduce the foreign currency costs of trade. The Deliver pillar of the strategy will focus on deepening effective and cost-efficient distribution mechanisms through the financing of transport logistics and storage infrastructure across the continent. The Board of Directors of Afreximbank also approved a revised local currency programme. This currency programme is geared towards the development of yield curves via African currencies. This would lead to greater use of local currencies, thus reducing the foreign exchange cost of intra- African trade transactions. 6

7 CAPITAL MARKET UPDATE Market Highlight The Nigerian equities market ended the outgone trading week on a negative note, as bears dominated activities in four of the five trading days. The market performance gauge, the All-Share Index (ASI), depreciated by 1.99 per cent or to close at 32,459.17, from 33, recorded in the preceding week. Market Capitalization also dipped by 2.31 per cent or N265 billion, slipping to N trillion, from the N trillion recorded the previous week. Similarly, all other Indices finished lower during the week with the exception of the NSE Insurance and the NSE Industrial Goods Indices that appreciated by 1.10 per cent and 0.22 per cent while the NSE ASeM index closed flat. Market sentiment was also lower as only Sixteen (16) equities appreciated in price during the week, significantly lower than Forty (40) equities of the previous week. At the end of the week s trading, a total turnover of billion shares worth N billion in 18,847 deals were traded by investors on the floor of the Exchange, in contrast to a total of billion shares valued at N billion that exchanged hands last week in 13,763 deals. Trading in the Top Three Equities namely Zenith International Bank Plc, Transnational Corporation of Nigeria Plc and FBN Holdings Plc (measured by volume) accounted for million shares worth N3.223 billion in 3,823 deals, contributing per cent and per cent to the total equity turnover volume and value respectively Recent Development A total volume of 9,779, 853 ordinary shares of Lafarge Africa Plc were listed on the Daily Official List of the Exchange on 5th July, The shares listed were issued to shareholders of AshakaCem Plc in exchange for their shares in AshakaCem Plc pursuant to delisting of AshakaCem Plc. With this listing of 9,779,853 ordinary shares, the total issued and fully paid up shares of Lafarge Africa Plc has now increased from 5,480,734,144 to 5,490,513,997 ordinary shares. Ashaka Cem Plc has been delisted from the Daily Official List of The Exchange following the approval of its application for voluntary delisting from The Exchange. The Company was effectively delisted from the Daily Official List of The Exchange on 4th July Red Star Express Plc announced the closure of its reg- Source: Nigeria Stock Exchange (NSE) 7

8 Market Highlight ister for the year ended 31 December Proposed Dividend is 40 Kobo per share, Closure Date is 2nd 4th August 2017, AGM Date is 31st August 2017 at Welcome Centre Hotel, International Airport Road, Lagos and Payment Date is 7th September Pursuant to Rule 3.1, Rules for Filing of Accounts and Treatment of Default Filing, Rulebook of The Exchange (Issuers Rules), which states that; If an Issuer fails to file the relevant accounts by the expiration of the Cure Period, The Exchange will: (a) send to the Issuer 5 July 2017: African Alliance Insurance Plc, Equity Assurance Plc, Fortis Microfinance Bank Plc, Guinea Insurance Plc, Premier Paints Plc, Resort Savings & Loans, Sovereign Trust Insurance Plc, African Paints (Nigeria) Plc, Aso Savings & Loans Plc, Ekocorp Plc, Evans Medical Plc, Goldlink Insurance Plc, Great Nigeria Insurance Plc, Omatek Ventures Plc, Union Dicon Salt Plc, Union Homes Savings & Loans Plc, Universal Insurance Company Plc. In accordance with the rules set forth above, the suspension of the afore-listed Source: Nigeria Stock Exchange (NSE) a Second Filing Deficiency Notification within two (2) business days after the end of the Cure Period; (b) suspend trading in the Issuer s securities; and (c) notify the Securities and Exchange Commission (SEC) and the Market within twenty- four (24) hours of the suspension, trading in the shares of the following seventeen (17) companies have been suspended today, companies will only be lifted upon the submission of the relevant accounts, provided The Exchange is satisfied that the accounts comply with all applicable rules of The Exchange. A total of 281,350 units of the Stanbic IBTC ETF 30 was cancelled from the Daily Official List of The Exchange today 5 July The total outstanding units 8

9 Market Highlight of Stanbic IBTC ETF 30 before the cancellation was 6,758,825 while the total outstanding units after the cancellation is 6,477,475 units. Coronation Asset Management Limited informed The Nigerian Stock Exchange that it has received the approval of the Securities and Exchange Commission to open the Initial Public Offering of 400,000,000 Units of N1.00 each at par of the Fixed Income Fund by Coronation Asset Limited. The Offer will open to the public for fifteen (15) working days. Details of the Coronation Asset Management Limited informed The Nigerian Stock Exchange that it has received the approval of the Securities and Exchange Commission to open the Initial Public Offering of 200,000,000 Units of N1.00 each at par in the Coronation Balanced Fund. The Offer will open to the public for fifteen (15) working days. Details of the Offer are as follows: Offer Opens Monday, 10 July 2017 and Offer Closes Friday, 28 July Source: Nigeria Stock Exchange (NSE) Offer are as follows: Offer Opens Monday, 10 July 2017 and Close Friday, 28 July Coronation Asset Management Limited informed The Nigerian Stock Exchange that it has received the approval of the Securities and Exchange Commission to open the Initial Public Offering of 1,500,000,000 Units of N1.00 each at par in the Coronation Money Market Fund. The Offer will open to the public for fifteen (15) working days. Details of the Offer are as follows: Offer Opens Monday, 10 July 2017 and Closes Friday, 28 July Outlook The Nigerian equities market closed lower in the outgone week, as the bears held sway throughout the week. The market performance was affected by a combination of profit taking and portfolio re-balancing which dampened the bullish sentiments witnessed in the market in recent times. In trading sessions ahead, mixed performance of bargain hunting activities, as investors take positions in anticipation of release of half-year results by quoted companies, and profit taking are expected. 9

10 Crude Oil Market Update Oil Market Review (July 3rd July 7th, 2017) At the end of trading on Friday July 7th, oil prices settled nearly 3 percent lower as rising U.S. production and OPEC exports hit a 2017 high, casting doubt over efforts by producers to curb global oversupply. West Texas Intermediate (WTI) crude futures finished $1.29, or 2.8 percent to close the week at $44.23 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, settled down $1.40, or 2.9 percent, to close at $46.71 a barrel on ICE Futures Europe. Earlier at the beginning of trading this week on Monday July 3rd, oil prices rose more than 2 percent, resuming its longest stretch of daily gains in more than five years after data pointed to diminished U.S. output, though analysts said news of rising OPEC production could cap gains. On Tuesday July 4th, oil prices fell, halting a run of eight straight days of gains on signs that a persistent rise in U.S. crude production is running out of steam. Many traders closed positions ahead of the U.S. Independence Day holiday on July 4, while Brent also faced technical resistance as it approached $50 per barrel. During midweek trading on Wednesday July 5th, oil prices tumbled about 4 percent, ending their longest string of daily gains in more than five years, as climbing OPEC exports and a stronger dollar spurred selling. On Thursday July 6th, oil futures settled up slightly, well off session highs, after a sharp but short-lived boost from a much bigger-thanexpected decline in U.S. inventories of crude oil and gasoline. Oil & Gas Price Movement: July 3rd, 7th, 2017 Date 3/7/2017 4/7/2017 5/7/2017 6/7/2017 7/7/2017 WTI Crude ($) Brent Crude ($) Natural Gas ($) Source: Reuters and New York Mercantile Exchange. indicates an increase in price. indicates a price reduction indicates no change DISCLAIMER: This publication is strictly for information purposes only. Zenith Bank Plc and its employees make no representation as to the accuracy and completeness of the information contained in this publication. Therefore we accept no liability for any loss that may arise from the use of such information. 10