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China inflows slowed by yuan slide

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BEIJING – China’s efforts to kick out speculators betting on currency gains are showing early signs of success, with cash flooding into the country slowing sharply and losses accelerating in the yuan, which hit the lowest level in more than 11 months Wednesday.

Foreign money entering China fell to a five-month low of $21.1 billion in February, according to central bank data this week, and compares to $72.3 billion in January.

Analysts say that is a result of Beijing’s moves that begun last month, to send the yuan lower and introduce bigger two-way moves in the currency to deter inflows. So-called “hot money” from abroad is a problem as it inflates asset prices like property, and adds to risks in the banking system.Currency traders are taking cues from the People’s Bank of China, the nation’s central bank, which has continued to fix the daily reference rate for the yuan against the U.S. dollar weaker. On Wednesday the rate was set weaker at 6.1351 per dollar, and in trading the currency fell further to 6.2040, with a higher number meaning a weaker yuan.

For the first time, the yuan traded past its previous 1% band.

The yuan typically trades stronger than the fixing, officially known as the central parity rate, but in recent weeks it has sharply depreciated past the fixing, and losses have accelerated this week.

The offshore yuan, which is also closely watched and traded mainly in Hong Kong, dropped to 6.1989.

The falling yuan is starting to affect markets beyond the currency too. A Chinese department store operator, Maoye International Holdings Ltd. 0848.HK -1.69% , was forced to pull a sale of yuan-denominated debt in Hong Kong on Wednesday, according to a person close to the deal, attributing it to dimmed appetite from investors due to the currency volatility.

One worry too has been financial derivative products that allow companies to profit from yuan-appreciation, but turn sour if the currency drops. The level of 6.20 in the offshore yuan market has been closely watched as analysts say it is where losses could start to grow fast.

“A move of the [offshore yuan] toward or past 6.20 would have major repercussions for the [yuan] market and Chinese businesses,” Dariusz Kowalczyk, a senior economist and strategist at Crédit Agricole, ACA.FR +2.05% said Tuesday. “These structured FX products have been sold by banks to—usually—SMEs in China and Taiwan, with the latter betting on continued [offshore yuan] gains. For most of the structures, banks no longer make payments to corporates at [offshore yuan versus U.S. dollar] levels above 6.15, where we are right now, and clients are exposed to unlimited, leveraged losses north of 6.20.”

But some say sales of these products, which have already opened companies up to mounting losses as the currency has continued to weaken and added to the speculative capital inflows, are falling.

The “slowdown in capital inflows can already be seen in weaker February trade data, as well as the fall in [offshore yuan] structured product sales,” analysts from Nomura said on Wednesday.

Analysts expect the March data for foreign exchange purchases to decrease even further as the companies and investors digest the central bank’s actions and the market’s reactions.

“It was only in late February that the market realized it might not be a temporary correction, it might be relatively prolonged correction and then the slowdown. I think you will see that in the March number,” said Ju Wang, a senior currency strategist at HSBC HSBA.LN -0.95% in Hong Kong.

Ms. Wang said this is a result of investors realizing the Chinese currency will no longer appreciate at the pace it has till now.

– WALLSTREET JOURNAL

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Adoption of AI Feature as NIPetGE Pays Courtesy Call at NNPC Ltd

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Enhanced adoption of artificial intelligence and other digital technologies to improve operations in Nigeria’s oil and gas industry is taking the centre stage in relevant circles.

The issue came up strongly when the President-elect of the Nigerian Institute of Petroleum and Gas Engineers NIPetGE, Prisca Kanebi, paid a courtesy call at the Nigerian National Petroleum Company Limited (NNPC Ltd), Abuja.

Biztellers reports that the Kanebi led delegation was received by the Group Chief Executive Officer of the NNPC Ltd, Bayo Ojulari, represented by the Executive Vice President, Gas, Power and New Energy, Olalekan Ogunleye.

According to a statement made available on Sunday, discussions at the meeting focused on the future of Nigeria’s hydrocarbon industry amid global energy transition concerns, technological changes and sustainability targets.

ALSO READ: NNPC Ltd, IOCs Raise Crude Supply to Local Refineries by 103% in 4 Months

The statement indicated that the NNPC Ltd acknowledged the role of NIPetGE in policy advocacy, technical development and innovation within the sector.

Speaking during the meeting, Kanebi highlighted recommendations from the institute’s recent conference, including the proposed establishment of a national centre for intelligent energy systems to support the deployment of artificial intelligence, the Internet of Things and robotics across the petroleum value chain.

She also commended the Federal Government’s decarbonisation efforts and reiterated the institute’s support for policies aimed at improving sustainability in the industry.

The institute also recommended the creation of a hydrocarbon-linked emissions trading system to allow Nigeria to take part in global carbon markets.

The institute also proposed fiscal incentives to support local manufacturing and service delivery in the oil and gas sector, as well as the expansion of the Energy Transition Plan to include measurable upstream decarbonisation targets backed by tax credits.

Other proposals included increased public-private partnerships in emission control infrastructure, carbon capture projects and hybrid renewable energy initiatives.

Both organisations also stressed the need for stronger collaboration between industry and academic institutions to improve professional capacity and align petroleum engineering practice in Nigeria with international standards.

The institute further disclosed that its bill seeking chartered status had passed second reading and was progressing towards a third hearing at the National Assembly.

It added that NNPC Ltd pledged support for future collaborations with the institute on initiatives aimed at improving efficiency and innovation in the energy sector.

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FHC Orders NUPRC to Comply with PIA

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Local Firms Lead Revival of Idle Oil Wells – SPE

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Nigeria’s indigenous oil and gas companies are reopening dormant wells and ramping up production from assets acquired from international oil companies (IOCs) to boost crude oil output.

The Society of Petroleum Engineers (SPE), Nigeria Council, made the assertion through its Chairman, Francis Nwaochie, on the sideline of the Offshore Technology Conference (OTC) which ended at the weekend in Houston, Texas.
Nwaochie said indigenous operators were already taking advantage of opportunities created by disruptions in the global energy market to increase production from existing assets.

According to him, local firms that recently acquired onshore and shallow water assets from IOCs were aggressively reviving inactive wells and maximizing available infrastructure to raise output levels.

“What we are seeing now is that indigenous companies are reopening wells from the assets they acquired from the IOCs. Some of them have almost doubled production from those existing assets,”.

He explained that the renewed focus on dormant wells and existing facilities had become critical at a time the global oil market was facing supply shortages triggered by geopolitical tensions in the Middle East.

The SPE Nigeria Council Chairman noted that Africa, particularly Nigeria, was well positioned to benefit from the supply gap because of the continent’s relative stability compared to some other oil-producing regions.

“There is a huge opportunity for Africa right now. The focus is gradually shifting to Africa because of the volatile environment in many other producing regions.”

He stated that indigenous operators were leveraging digital technologies, financing opportunities and local expertise to improve production efficiency and optimise existing fields.

He added that stronger implementation of local content policies was also helping to create a more stable operating environment for oil and gas investments.

“Local content is very critical. Once communities and local companies clearly understand their roles and benefits, then you create peace across the industry. Business only thrives in peaceful environments.”

ALSO READ: Nigerian Navy Recovers Large Cache of Illegal Refined Petroleum Products

Nwaochie also stressed the need for Nigeria to move beyond crude oil production and begin developing indigenous technologies for the energy industry.

According to him, SPE Nigeria Council was actively supporting innovation and technology development among young Nigerian engineers and researchers.

He disclosed that the association was engaging the National Universities Commission(NUC) on reforms to engineering curricula in universities to better prepare graduates for the future of the energy industry.

“One of our major focuses in SPE is technology development. We should not only import machines and equipment, we must begin to develop our own technologies locally.”

Nwaochie revealed that SPE was already supporting local innovators working on technologies such as remotely operated underwater vehicles (ROVs), noting that indigenous technology development will strengthen Nigeria’s economy and deepen local participation in the oil and gas sector.

“We may not get everything right immediately but we must start somewhere. That is how countries that dominate the global energy industry built their capacities.”

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