NIGERIA SIGNS GAS SUPPLY AGREEMENTS WITH SHELL, CHEVRON FOR POWER STATIONS AS CRUDE OIL RISES TO $115
Nigerian National Petroleum Corporation (NNPC), has signed agreements with Royal Dutch Shell Plc and Chevron Corp. for the supply of natural gas to the country's power stations just as crude oil prices rose to $115.
The two agreements, which cover the supply of more than 70 per cent of the total gas requirements to the domestic power industry, serve as a framework for future agreements, Petroleum Minister, Diezani Alison-Madueke disclosed in Abuja.
'We are now in a position where we can very rapidly replicate these agreements across all other power plants,' she said. 'Although it has taken a while to close the negotiations, the knock-on effect in terms of other agreements that can be immediately executed is phenomenal.'
Nigeria wants to expand transmission and processing facilities to deliver the fuel to power plants in order to increase generation more than four-fold to about 14,000 megawatts by 2013. Most of the gas currently pumped with crude oil in the nation is flared off due to inadequate infrastructure to process it.
The Nigerian Petroleum Development Co. (NPDE), the exploration unit of the NNPC expects its oil output to reach 250,000 barrels per day within three years as it acquires five new oil blocks. The exploration unit currently pumps 70,000 barrels of oil per day, according to the statement.
Meanwhile, Brent crude oil hovered around $115 a barrel on Friday as a softer dollar tempered demand worries triggered by Euro zone debt concerns and weak U.S. economic data. The dollar fell across the board, hitting a record low against the Swiss franc and a three-year low versus the New Zealand dollar.
The yen fell against the dollar after ratings agency, Fitch revised Japan's outlook to negative. 'The immediate factor impacting crude's trade direction is the U.S. dollar, which is helping to support prices,' Victor Shum, an analyst at Purvin & Gertz, said in Singapore. A softer dollar makes commodities priced in the greenback more attractive to consumers using other currencies.
'It's also the Memorial Day holiday in the U.S.today, and most traders wouldn't want to be caught short over the long weekend.' Brent crude rose seven cents to $115.12 a barrel.
U.S. crude was up 39 cents at $100.62, after falling more than one per cent on Thursday. Analysts expect to see little volume ahead of the Memorial Day holiday, which marks the start of the U.S. gasoline-intensive summer driving season. 'U.S. petrol demand also continues to slack ahead of the summer driving season, which traditionally kicks in over the coming holiday weekend (the Memorial Day celebrations),' VTB Capital's Andrey Kruychenkov said.
'We expect to see low volume today and as long as the currency market stays this volatile, this will have an influence in prices,' Petromatrix's Olivier Jakob said. The Group of Eight leaders fired a note of caution on prices on Friday, noting that while the global economic recovery was becoming more 'self-sustained', higher commodity prices were hampering further growth.