Friday, February 28, 2014

China to stimulate VLCC demand

The dramatic changes in US crude oil production through the development of the shale oil industry have already had a significant impact on the VLCC market in terms of demand.

The current forecast is that US shale oil production will level off at around 9.5 mill barrels per day by 2016, an increase of 4.5 mill barrels per day over the previous five years, Gibson Research said in its weekly report. 
Coupled with a lack of appetite for barrel demand in Europe, it is hardly surprising that the crude tanker market has been particularly focused on growing demand from Far East customers and in particular from China.
Last week, Reuters’ data claimed that China’s crude oil imports grew by just 4% last year, a good rate of growth in any other market, but not when we are talking about Chinese demand, Gibson said. 
This level of growth was their slowest rise since 2007 and well below the 17% rise achieved in 2010.
Recently, the South China Post stated that Chinese crude oil imports surged in January to 6.63 mill barrels per day, although largely attributed to stockpiling ahead of the Chinese New Year. This followed a healthy 6.33 mill barrels per day in December.
The article speculated that these strategic stockpiles are being replenished, which accounted for the surge. The recent spike could be maintained when a new 18.9 mill barrels per day storage cavern at Huangdao is scheduled to commence filling this quarter. Already we could be looking at a substantial increase in Chinese imports for 2014, Gibson said.
Another interesting development announced last week by the South Korean government was the approval for the construction of two nuclear plants. This follows concerns about the risk of blackouts and the nation’s ability to maintain power supplies.
Following the Fukushima disaster in March, 2011, the South Korean government initiated a series of nuclear reactor shutdowns over safety issues.
This latest initiative is a complete policy reversal coming little more than a month after the government a announced that it had planned to cut its reliance on nuclear power to 29% of its total power supply by 2035.
What impact this latest development has on South Korea’s high dependence for fossil fuels remains some way off. Japan has also had to wrestle with similar problems, particularly where nuclear power generation is concerned. Japanese crude oil imports have averaged around 3.6 mill barrels per day over the past four years and show no signs of increasing any time soon.
For the tanker market, the continued growth of China is paramount and any signs of a major slowdown in the economy will be of serious concern.
However, although there is a degree of slowdown, the country’s appetite for crude remains fairly healthy, with the IEA expecting 0.35 mill barrels per day growth in 2014.
In addition, we should not forget that there will be an additional demand to fill up strategic reserves. Cautious optimism is also the phrase for oil demand for the rest of developing Asia with another 0.33 mill barrels per day anticipated this year, Gibson concluded.

Thursday, February 27, 2014

Petcoke: Toxic Waste in the Windy City

Leaky barrels

SEEN one way, economic recovery in Europe and America is good for the Organisation of the Petroleum Exporting Countries (OPEC). Oil stocks in industrialised countries are at their lowest for five years; the latest monthly report from the International Energy Agency (IEA), a club of oil-consuming countries, anxiously urges producers to keep pumping to replenish them.
But the longer-term future for OPEC, which produces about a third of the world’s daily consumption of 90m barrels of crude oil, is another matter. Often described as a cartel, it is better seen as an anti-glut group. When demand is weak, its members can curb production to prevent the price plummeting. But when demand is healthy, its ability to curb new producers is limited. And new producers abound.
Too useful to export, for now

America’s domestic production of crude (and gas, which displaces some oil) is rocketing. The IEA says the country will produce 14m barrels a day (b/d) next year, on a par with Saudi Arabia (see chart). That has reduced America’s imports, as well as boosting exports of fuels (exports of crude oil are mostly banned). That frees crude from other places, such as West Africa, to go to Europe instead. Similarly, Latin American and Middle Eastern oil that once would have gone to America now goes to Asian customers.
For the oil-rich, even worse is in store. Other factors that have propped up the price over the past decade are likely to wane in importance. Even the slightest easing of sanctions helps Iran, potentially a huge producer. It increased its exports by 100,000 b/d in January—the third consecutive monthly rise. Iraqi oil exports, stricken by the war and its aftermath, are also set to increase. The Economist Intelligence Unit (our sister company) forecasts a “significant boost” in 2014 from 2.4m b/d last year. This assumes new investment pays off, and a deal with the semi-autonomous Kurdish region. Libya could be another source of production: its exports have collapsed to only a few hundred thousand barrels a day, against 1.6m in June last year.
These downward pressures on the oil price present OPEC with a tricky decision. Its natural response would be to cut production from the current target of 30m b/d to support prices near the level of recent years, of around $100 a barrel. But OPEC’s record of enforcing quotas on its 12 members is patchy. Another option would be for Saudi Arabia and its Gulf allies, the group’s biggest producers, to cut production unilaterally. But that would cede market share to their hated rivals, Iran and Iraq. An alternative would be to increase production sharply. That would send the price down: painful for the kingdom, but even more painful for higher-cost producers (not least America, where the “tight oil” now coming on stream requires prices of $50 and above to be profitable).
OPEC’s best hope is continued American protectionism. Any easing of the restrictions on the export of liquefied natural gas (LNG) or crude will exert more downward pressure on the oil price. That might be good for the world economy, but it is not a priority for American consumers, who would like cheaper petrol for cars and propane for heating, especially during cold snaps like the recent one. “Chickens are dying,” noted an American speaker at an event put on by Argus Media, an energy-information group, during the International Petroleum Week in London. “Farmers are asking, ‘Why are we exporting propane when we could be burning it here?’”

Fresh Unremitted $22.8bn Oil Revenue Uncovered At NNPC

The Nigeria Extractive Industries Transparency Initiative (NEITI) has uncovered a fresh $22.8 billion “off balance sheet items” hidden from the financial records of the Nigerian National Petroleum Corporation (NNPC).
The sum represents NNPC’s alternative funding/financing arrangements with its Joint Venture partners in form of third party financing from external financial markets and Modified Carry Arrangement (MCA) which are loans from existing JV partners (international oil companies).
NEITI’s executive secretary Hajiya Zainab Shamsuna Ahmed made the disclosure yesterday during the second day of the ongoing joint House of Representatives investigative public hearing into alleged shady transactions between the NNPC and two top oil companies in Switzerland, Vitol and Trafigura.
NEITI’s executive secretary, in a memorandum to the joint House committees on Petroleum Resources Uptream, Downstream and Justice conducting the probe, also called for transparency in NNPC’s alternative funding transactions.
The presentation is based on NEITI’s 2009-2011 audit report of the oil and gas revenue to the country.
“…these transactions (alternative funding) which sum up to $22.8 billion are off balance sheet items (not disclosed in NNPC’s audited financial statements). The implication is that there may be significant continent liabilities to the federation that is not being disclosed…there is therefore the need for transparent disclosure of all alternative funding arrangements in the audited financial statements (AFS) of NNPC,” she told the joint House panel.
NEITI accused the NNPC of diverting $1.73 billion meant for funding JV cash calls/operations to non-cash call items, namely: security payments ($600,000,000), National Petroleum Investment Management Services (NAPIMS) management fees ($486,604,000) and expansion of ESCRAVOS Lagos Pipeline Project ($646,950,000).
“Non-cash call items totalling $1.73 billion were financed from the CBN/NNPC JP Morgan Chase Cash Call Dollar Account. This reduced the amount available for funding JV Operations with the attendant implications of NNPC seeking alternative funding arrangements to fund cash call shortfalls… The practice should be discouraged. NNPC should apply funds meant for JV cash calls strictly for that purpose.”
NEITI’s executive secretary said Nigeria’s four refineries were operating “far below their nameplate capacities”. The operational and overhead costs are the same irrespective of the volume of production, she said.
“The 445,000 barrels per day allocation should be reviewed to the actual refining capacity of the refineries. The federal government should consider privatisation of the refineries.”
Again, NEITI’s executive secretary said there is no cost efficiency in the NNPC’s Crude Oil-Product Exchange, otherwise known as crude oil swap arrangement with the offshore processing organisations. She reported $866,189,632.47 in under-deliveries.
“The total cost of of offshore processing consisting of cost of crude, processing fees, freight and demurrage (if applicable) when compared with the reported price of PMS, DPK, AGO, and the retained products proceeds paid to NNPC is not economically beneficial.”
Meanwhile, the extractive transparency organisation has indicted the NNPC over the 2013 Berne Declaration report alleging a $6.8 billion crude oil swap fraud NNPC perpetrated in connivance with some Swiss oil trading companies.
According to NEITI, the allegation by the Swiss-based organization “has substance”.
The position of the NEITI is a sharp contrast to that of the group managing director of the NNPC, Andrew Yakubu, who said on Tuesday that the claims of the Bernes Declaration “are baseless and without material substance” and requested that the committee members “ set it aside in its entirety”.
The Central Bank of Nigeria (CBN) deputy governor, financial system stability, Dr Kingsley Moghalu, at the House investigative hearing said the CBN was not involved in the oil deals between the NNPC and the Swiss oil trading companies.
“The CBN was not involved in any of the oil deals and does not have an information on the subject matter at hand, “ Moghalu said.
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Wednesday, February 26, 2014

NEITI: Nigeria Loses $8bn Through Crude Oil Swaps

140512N.NNPC-Towers,-Abuja.jpg - 140512N.NNPC-Towers,-Abuja.jpg
 NNPC  office

•  NNPC: Trafigura, Vitol account for 9% of crude oil lifting
• Corporation denies colluding with Swiss firms to defraud FG
Muhammad Bello

Nigeria may be losing an estimated $8 billion annually through the crude oil-for-refined products exchange arrangement, better known as crude oil swaps, which the Nigerian National Petroleum Corporation (NNPC) has with oil traders such as Trafigura, Vitol, Aiteo Energy Resources, Mercuria, Glencore, Taleveras Group Nigeria Limited, Sahara Energy Limited, Etena Oil and Gas Limited, Ontario Oil and Gas and Rahmaniya Oil and Gas.
Of the 445,000 barrels of crude oil per day brought by NNPC to meet its domestic crude refining capacity, slightly under 50 per cent is swapped with commodity traders in exchange for petroleum products which are imported into the country. The other 50 per cent is supposedly refined by NNPC’s refineries.
However, the state-run oil company has said contrary to claims by a Swiss-based non-governmental organisation (NGO), Berne Declaration, that 36 per cent of its crude oil is lifted by Vitol and Trafigura, both Swiss traders, account for 9 per cent of lift contracts.
The corporation also denied that the federal government lost $6.8 billion in oil revenue as a result of the oil swaps it has with Swiss-based companies listed in the NGO’s report, which prompted the probe instituted by the House of Representatives.
Speaking yesterday before an ad hoc committee set up by the House to investigate the allegations made by the Swiss NGO, the Group Managing Director of NNPC, Andrew Yakubu, said the oil corporation never sold crude oil to the firms at below market price as claimed by Berne Declaration in its report.
“By our records, Vitol and Trafigura account for 30.7 million barrels out of the total of 341.07 million barrels sold by the corporation in 2013 lifting. The lifting of Trafigura and Vitol in 2013 therefore represents 9 per cent of the total lifting as against 36 per cent reported by the Berne Declaration,” Yakubu explained to the committee chaired by Hon. Muraino Ajibola.
Instead of foreigners dominating the oil deals, the NNPC boss said more chances were given to Nigerian traders, who “collectively accounted for 98.2 million barrels during the same period, other international traders including the Swiss trading companies accounted for 61.2 million barrels, while offshore and the Nigerian refineries took 36.2 and 38.3 million barrels respectively.”
According to him, the selection of traders has standardised criteria, which evaluate buyers’ facilities, volume of transactions, turnover and financial health of the companies that is applicable to all, including Vitol and Trafigura.
He also added that the 2012/2013 term contracts had a preponderance of Nigerian trading companies with 23 out of the 40 regular buyers.
On the issue of NNPC colluding with Swiss-based traders to sell crude oil at below market price, Yakubu said: “Our pricing strategy is aligned to international best practices in the industry. Our prices are based on a reference to the benchmark crude Brent whose prices are published by Platts for the international trading community, a premium/differential for individual crude grades and the selection of an option.”
He further added that the average of five consecutive days' publications by Platts provides about 97 per cent of the value of any of its crude blends, while differential/premium account for about three  per cent of the total value.
“The differential/premium are established based on a wide range of publications (Platts, Argus, LOR, etc) and internal market assessment by the corporation for all crude grades.
“These processes apply to all buyers of Nigerian crude based on the terms prescribed in the General Sales Agreement entered by all parties. Overall, our assessment of the OSP (differential/premium) has matched or even exceeded the market value of Nigerian crude grade published by Platts, Argus and LOR, as exemplified in the following in the historical performance of the Bonny light since 2005,” he added.
Yakubu, who debunked the Berne Declaration report as “trying to portray NNPC in bad light”, said its claim that 100 per cent of Nigerian crude oil is sold through private traders was not true.
On the sale of unutilised crude oil at knockdown prices to Swiss companies through the crude oil-for-products exchange scheme (swap arrangement), Yakubu stated: “The NNPC Act mandates the corporation to supply petroleum products to the federation as supplier of last resort. In order to meet this obligation, 445,000 barrels of crude oil is assigned to the corporation at international price for domestic refining.
“The corporation disposes the unrefined portion of the assignment through direct exports or other secondary arrangements including swaps to ensure procurement and delivery of refined petroleum products,” he said.
However, despite the insistence by NNPC that no losses had been made from its crude oil swaps, it has come to the open that the federal government may have incurred losses of a staggering $8 billion annually as a result of the deals with Vitol and Trafigura, among other traders.
The ad hoc committee probing the alleged scam noted that in most cases, the foreign companies do not fulfill their own end of the bargain by refusing to supply refined products.
Documents given to journalists yesterday showed that NNPC allocated about 50 per cent of its 445,000 barrels of crude oil per day meant for domestic refining to the following companies – Vitol Limited, Trafigura, Mercuria, Glencore, Taleveras, Sahara Energy, Etena Oil and Gas, Aiteo Energy, Ontario Oil and Gas and Rahmaniya Oil and Gas.
In the process, $8 billion in under-delivered products from the crude oil swap arrangements has gone down the drain.
A report submitted to the committee by the Nigeria Extractive Industries Transparency Initiative (NEITI) also detailed how four of the oil traders “under-delivered” 500,075,239.3 litres of products in 2011.
They are: Trafigura (173,786,600 litres); Vitol (654,440.7 litres); Taleveras (152,308,878 litres); Aiteo Nigeria Limited (193,046,590 litres) and Ontario Oil and Gas (180,278,732 litres).
According to the report, Nigeria has lost revenue in billions of dollars, just as it also alleged that some of the oil-trading companies owed the NNPC products worth over $800 million.
The report also showed that Duke Oil Company, a trading subsidiary company of NNPC, was brought in as a middle player to protect some of the local companies used in the swap deals.
However, the NNPC during its presentation at the hearing, stated that the crude oil-for-refined products exchange agreement with Duke Oil Company started in February 1, 2011.
It said the Pipelines and Product Marketing Company (PPMC) allocates 90,000 barrels of crude oil to Duke Oil Company in exchange for the delivery of refined products equivalent to the value of the crude oil.
According to NNPC, Duke Oil Company operates and manages the swap arrangement by loading three cargoes through its nominated operators – Messrs Aiteo Energy Resources, Ontario Oil and Gas and Taleveras Group. Each company handles 30,000 barrels of crude oil per day.

 The public hearing continues today.

Tuesday, February 25, 2014

PetroSaudi eyes JV deal with Ghanaian refinery

(Photo for illustrative purposes only)

Ghana's sole refinery, the Tema Oil Refinery (TOR), is close to signing a joint venture agreement with PetroSaudi International and a deal is expected soon, Ghanaian President John Mahama said on Tuesday.
The 45,000 barrels-per-day plant has been hobbled by repeated shutdowns in the last four years, often due to a lack of funds to procure crude for processing.
"A joint venture agreement between TOR and PetroSaudi is being finalised to revamp the operations of our refinery. This will reduce the huge amount of foreign exchange spent on importing finished products," Mahama said in his state of the union address to parliament without giving details.
Ghana is one of Africa's newest crude exporters after starting production from its offshore Jubilee field in late 2010. But authorities say the country's refinery needs an upgrade to be able to run the domestically produced oil.
Oil production has become a major source of government revenue and foreign exchange and when it came on stream it led to a spike in GDP growth in 2011, making Ghana one of the world's fastest growing economies.
Current output stands at around 100,000 barrels per day and lags national targets.

Monday, February 24, 2014

Deja vu on system for calculating OPEC oil output quotas

Top Image
By Margaret McQuaile in London
February 21, 2014 - Former OPEC delegates and veteran journalists who covered the doings of the oil producer group during the mid-to-late 1980s may have had a sense of deja vu on learning that Iraq has been working on a proposal for allocating OPEC crude production quotas.
Deputy Prime Minister Hussain al-Shahristani, talking to journalists in London late last month, gave no details beyond "we are preparing a proposal for calculating quotas" and saying the discussions could start when Iraqi crude output capacity reached somewhere between 4 and 5 million b/d.
Given the various infrastructural and security constraints that are capping the country's output at around 3 million b/d, those discussions are probably some way off.
Crude oil reserves held by OPEC's Gulf member countries

Source: OPEC Annual Statistical Bulletin
Shahristani gave nothing away about the kind of formula Iraq may put forward for calculating quotas, but if Baghdad is aiming for a model based on a basket of oil-related criteria such as reserves, production capacity, historic share of output, and non-oil-related economic indicators such as population, GDP and external debt, it is probably barking up the wrong tree.
OPEC tried in the mid-1980s to come up with a quota-allocation system that would take into account those very factors. It failed.
Neil Atkinson, head of analysis at Lloyd's List Intelligence, remembers that period well. In late 1985, OPEC abandoned quotas and embarked on its "fair share" policy aimed at recovering market share lost to non-OPEC producers.
Prices spiraled downward through the first half of 1986 to below $10/b for North Sea Brent, but below $5/b for some Gulf grades.
In the subsequent effort to cut back production, OPEC tried to devise a scientifically based system for allocating quotas.
But, as Atkinson recalls, there was nothing scientific about it. It was, he says, "a shambles."
Veteran analyst Mehdi Varzi, now president of Varzi Energy, also recalls previous OPEC efforts to divide production among members and says that any attempt to devise a system for calculating quotas would be "a complete and unmitigated waste of time."
For a start, "every country will put special emphasis on its own strengths," he says, with Nigeria and Iran, for example, likely to want a high weighting for population and Iraq perhaps likely to argue that it is entitled to special treatment because it was out of the market for so long.
What it comes down to, Varzi says, is "who has the muscle, who has the production capacity."
As for reserves, Varzi says: "I question every single number in OPEC. Nothing tallies in OPEC because no one has come in from the outside."
OPEC oil reserves jumps        
A glance at some of the reserves figures published by OPEC, with significant increases declared by some countries between one year and the next without explanation, does indeed raise questions.
Between 1987 and 1988, Saudi Arabia's reserves grew by more than 50%, from 169.585 billion barrels to 254.989 billion barrels.
Kuwait's big year-on-year reserves increase was between 1983 and 1984 when the number jumped by 38.4% to 92.71 billion barrels from 67 billion barrels.
Iran's reserves jumped by 57.4% between 1985 and 1986, from 59 billion barrels to 92.86 billion barrels, while the UAE almost tripled its reserves -- from 32.99 billion barrels to 97.2 billion barrels over the same 12-month period.
Iran also declared a 32% year-on-year reserves increase in the early 2000s -- when it told OPEC that it had boosted reserves to 130.69 billion barrels in 2002 from 99.08 billion barrels in 2001 -- and a 10% hike between 2009 and 2010, to 151.17 billion barrels from 137.01 billion barrels.
Iraq announced significant reserves increases of 38.9% between 1986 and 1987, from 72 billion barrels to 100 billion barrels, and 24.4% between 2009 and 2010, from 115 billion barrels to 143.1 billion barrels.
So, considering the potential for member countries to exaggerate the various data that might be prioritized, is it possible to design a scientifically based quota system?
"I don't think it's politically possible," Atkinson says.
"Quotas that would imply a total ceiling at a reasonable level would mean that some members would have to sacrifice market share and volumes, and this is difficult to see given the current tensions within the organization. And if we look beyond 2015-2016, it's difficult to see these tensions disappearing," he says, highlighting the fractious relationship between Saudi Arabia and Iran.

The Iraqi idea of a system for devising quotas "only makes any sense if their production is going to increase sharply between 2014 and 2015," he says. "Unless there is a big increase in demand, if Iraq is going to produce more, the others are going to have to produce less."
And the only way to bring Iraq -- which has not been part of OPEC output agreements since its August 1990 invasion of Kuwait -- back into the quota system without reducing the existing shares of other members, in particular those unable to increase their capacity levels, will be to make the OPEC cake bigger and therefore easier to divide, he says.
"But it's hard to see how that can be done, given current market conditions, without risking a price collapse."
In the shorter term, OPEC may have more to worry about than the production increases Iraq is anticipating.
Talks now under way between Iran and six world powers on the nuclear issue could lead to the removal of sanctions and more than 1 million b/d of additional Iranian crude returning to the market later this year or early next, and the Libyan authorities could succeed in ending the port blockades and field shutdowns and bringing several hundred thousand barrels of daily production back on line.
On the other hand, lack of progress on the Iranian nuclear issue would mean no increase from Iran while the political chaos in Libya could continue to keep oil output low.
Quotas or no quotas, only one OPEC country -- Saudi Arabia -- has the ability to respond to either scenario.

Friday, February 21, 2014

Missing Oil Revenue

Lamido Sanusi was dismissed on Thursday after charging the national oil company with failing to turn over billions of dollars. Stefan Wermuth/Reuters
DAKAR, Senegal — President Goodluck Jonathan of Nigeria removed the governor of the country’s central bank from his post on Thursday, after the bank governor repeatedly charged that billions of dollars in oil revenue owed to the treasury was missing.
The dismissal of the bank governor, Lamido Sanusi, was seen as further evidence of the Nigerian government’s weakening resolve in tackling widespread corruption, a problem that has plagued the country since independence, analysts said.
Mr. Sanusi’s removal was greeted with dismay in financial markets. The country’s stock market fell sharply, bond trading was halted and the value of the Nigerian currency, the naira, plunged to a record low against the dollar before the bank intervened to prop it up. Outside investors had generally seen Mr. Sanusi as an effective regulator of the country’s troubled banking sector; his tenure was scheduled to last until June.
His dismissal, along with a series of accusations of misspending by high officials and a presidential pardon last year for a state governor convicted of stealing millions, has prompted Nigerian news outlets to depict Mr. Jonathan’s government as too casual about corruption.
At the heart of the problem are the billions of dollars in oil revenue that accrue each year to Nigeria, the largest oil producer in Africa. Oil yields 95 percent of the country’s total export earnings, and Mr. Sanusi has been saying for months that a substantial portion of the money was missing from public coffers.
Oil wealth has created a small but immensely wealthy elite in a country where poverty is on the rise; by some estimates, nine-tenths of the economic benefits from oil production go to 1 percent of the population. So when oil money goes missing — and Mr. Sanusi has said that as much as $50 billion could be unaccounted for, a figure since revised downward — it touches a nerve in Nigeria.
A parliamentary committee is now investigating the claims of missing oil money, first raised by good-government groups and given added weight by Mr. Sanusi. Even the country’s finance minister, a staunch defender of Mr. Jonathan’s government, has called for an audit.
Mr. Sanusi, an aristocrat from the ancient Muslim city of Kano, raised the issue in a letter to Mr. Jonathan in September, saying that the state-run Nigerian National Petroleum Corporation, or N.N.P.C., had failed to turn over nearly $50 billion in revenue over an 18-month period, from January 2012 to July 2013, “in gross violation of the law.” Though oil prices were strong, official figures inexplicably showed declining revenue and falling reserves.
Exactly how much money may be missing is unclear, as Mr. Sanusi acknowledged in a letter to the Nigerian Senate this month. It could be “$10.8 billion or $12 billion or $19 billion or $21 billion — we do not know at this point,” he wrote, adding that the apparent diversion “has been going on for a long time” and could “bring the entire economy to its knees” if it is not stopped.
But he may have taken on too big an opponent in the national oil company. The sprawling company acts as the country’s oil buyer, seller, explorer, producer, processor and regulator, and is “at the nexus between the many interests in Nigeria that seek a stake in the country’s oil riches,” according to a 2010 Stanford University study.
The study said that while the company “functions well as an instrument of patronage,” it is neither competent nor efficient in its many operations. Mr. Sanusi went further, accusing it this month of “illegal and unconstitutional acts,” including transferring income from government-owned oil properties to “private hands.”
The oil company reacted to Mr. Sanusi’s accusations with outrage, though it initially acknowledged that about $10.8 billion in oil revenue had not been accounted for. Then on Thursday, Mr. Jonathan’s government ousted Mr. Sanusi, saying his “tenure has been characterized by various acts of financial recklessness and misconduct.”
Anticorruption activists said that explanation for his dismissal would not be widely believed.
“Nigerians will see it as the result of the whistle he has blown on the nonremittances by the N.N.P.C. to the Federation Account,” said Dauda Garuba of the Revenue Watch Institute, which is supported by George Soros’s Open Society Foundations, among others. “Public opinion agrees with Sanusi.”
Another watchdog group in Nigeria, the Policy and Legal Advocacy Center, said in a statement Thursday that Mr. Sanusi’s removal exposed “the wider ramifications and impunity of corruption currently bedeviling the fiscal responsibility and accountability of this government.”

Thursday, February 20, 2014

BG Buys Nigerian LNG to Replace Supplies out of Egypt

To replace LNG supplies from its Egyptian operations, BG Group has bought six LNG cargos from Italian utility Enel. The cargos are coming from Nigeria’s NLNG plant where the Italian firm owns export capacity.
BG will take delivery of the cargos from October at the NLNG plant.
BG’s Egyptian LNG operations account for about one-fifth of the company’s production but has seen its share of gas shorted in Egypt. The firm said the government there had not honored agreements covering its share of gas from fields. Egypt has been siphoning off gas for export and diverting it to the domestic market, preventing BG from meeting its export obligations.
A force majeure has been served on BG’s Egyptian LNG and notices sent to the affected buyers and lenders.

Boko Haram chief threatens attacks in Nigeria oil region

Boko Haram chief threatens attacks in Nigeria oil region
A screengrab taken on December 12, 2013 from a video obtained by AFP shows a man claiming to be the leader of Boko Haram
Kano (Nigeria) (AFP) - The leader of radical Islamist group Boko Haram, Abubakar Shekau, threatened attacks in Nigeria's oil-rich Niger Delta region in a new video released on Wednesday.
"You will in coming days see your refinery bombed," Shekau warned in the 28-minute video obtained by AFP through the same channel as previous clips.
It is unclear when the video was recorded. "Niger Delta, you are in trouble," Shekau said, speaking in Hausa, the dominant language in northern Nigeria.
The video was shot in an open field, where Shekau was surrounded by an armoured tank, two military vans and about a dozen gun-bearing soldiers.
Nigeria, Africa's largest oil producer, derives more than 90 percent of its foreign exchange earnings from oil.
The US government, which has designated Shekau a terrorist, has offered a reward of up to $7 million for information on his whereabouts.
In the video, Shekau -- who admitted killing an Islamic cleric, Adam Albani, about two weeks ago in the northern Nigerian city of Zaria -- also threatened to kill other Muslim and political figures in the country, including the respected Shehu of Borno, a prominent Muslim leader, and the Emir of Kano, Ado Bayero, who was attacked by suspected Islamists last year.
He slammed them as "infidels."
"The reason why I will kill you is you are infidels. You follow democracy. Whoever follows democracy is an infidel. This is Shekau. This is why I am in enmity with you," he said, his comments interspersed with gunshots fired in the air by him and his aides.
The Boko Haram leader also listed former military heads of state, Generals Muhammadu Buhari and Ibrahim Babangida, as "infidels".
He vowed that his group will henceforth destroy any schools whenever it sees them.
Boko Haram which in Hausa means Western education is evil, has said it is fighting to create a strict Islamic state in the country's mainly Muslim north.
Shekau, dressed in a military camouflage along with his lieutenants, he mounted on top of the armoured tank and fired shots in the air at the beginning of the video recorded.
He urged his fighters to "hold on to your weapons and continue fighting".
"Let them understand that our work is not confined to Yobe, Borno and Adamawa. Make them understand that we are not restricted by emergency rule. They should understand we are under the canopy of Allah."
He said that his militant group are fighting Christians "wherever we meet them and those who believe in democracy, those who pursue Western education...we will kill whoever practices democracy."
- 'A state of war' -
The video was released 48 hours after Borno state governor claimed that the sect was more armed than the regular Nigerian security forces.
The governor of embattled Borno state, where Boko Haram is most active, warned President Goodluck Jonathan on Monday that the military is outgunned in its fight against the sect and more troops are urgently needed.
"We are in a state of war. This is what I came to tell the president," Kashim Shettima told reporters after the meeting.
"I made it emphatically clear to Mr. President that Boko Haram are better armed and better motivated," than the security forces, he said in Abuja.
He made the call following the latest massacre in Borno of 106 people in the mostly Christian village of Izghe on Saturday.
A presidential spokesman on Tuesday has sought to downplay Shettima's claim.
The Islamist uprising has killed thousands since 2009.
Nigeria, Africa's most populous nation, is roughly evenly divided between a mainly Muslim north and a predominantly Christian south.

Tuesday, February 18, 2014

China now world's largest gold consumer, though world demand down

China took the gold medal last year in purchases of the precious metal, becoming the world's largest consumer even as overall world demand was down in the face of rising stock prices.
Consumers bought a record 3,863.5 tons of gold jewelry, coins and bars worldwide last year, up 21% from 2012, according to data released Tuesday by the World Gold Council, a market development organization for the industry.
China and India led that demand.
Demand was up 32% in China, where consumers bought 1,120.1 tons of gold, overtaking India as the world's largest consumer, according to the group's annual report.
Chinese purchases topped the 974.8 tons purchased in India, where demand was up 13%. U.S. consumers bought 190.3 tons, an increase of 18% from 2012.
But the global growth in consumer purchases was offset by an outflow of 881 tons from exchange-traded funds. That was a key factor in reducing overall gold demand by 15% last year, the report said.
The Federal Reserve and other central banks also reduced their gold purchases. They bought 369 tons, down 32% from the previous year.
Despite those declines, 2013 was a strong year for gold demand across a variety of sectors and regions, said Marcus Grubb, managing director for investment strategy with the World Gold Council.
"Specifically, it was the year of the consumer," he said. "Although demand has continued its shift from West to East, the growing demand for gold bars, coins and jewelry is a global phenomenon."
Many consumers and investors have flocked to gold as a haven in recent years in the wake of the financial crisis and gyrating stock markets. But a rebound in financial markets last year led to a sharp drop in gold prices.
The average annual price in several currencies was about 16% lower in 2013, the report said.
Gold Price in US Dollars Chart,0,7849453.story#ixzz2tgtkifal

$20bn Oil Revenue: US Ready To Assist Nigeria – Envoy

The United States’ ambassador to Nigeria, Ambassador James Entwistle, has said that the US will be glad to carry out a neutral investigation into the Nigeria’s $20 billion missing oil revenue.
CBN governor Sanusi Lamido Sanusi had claimed in a Senate hearing that $20 million oil revenue was still unaccounted for by the NNPC, a claim the corporation stoutly denies.
But in an exclusive interview with our reporter during his visit to Kano State, James Entwistle stated that this development was part of US government’s response to the request put forward by Nigeria’s President Goodluck Jonathan in his meeting with President Obama last September.
According to the US Envoy, President Jonathan said to Obama: “Look, why don’t you help in investigating oil bunkering and theft in my country”. Obama replied, “I will see what I can do.”
Entwistle added that in line with US government’s commitment towards recovering $20 billion missing oil revenue, if Nigeria’s financial institutions witness any unusual financial transactions, the government should not hesitate to notify US representative in the country for investigation.
In what appears as if US envoy doubted Nigeria’s government readiness in combating oil bunkering, he told LEADERSHIP: “I was surprised when I took a helicopter above Niger Delta; it revealed to me that oil bunkering is not hidden from the federal government, or anybody. My conclusion is very simple: some people must know what is going on.”
He noted that though corruption is the big issue in America and the world over, it requires Nigeria’s and any other countries’ concerted effort through provision of relevant laws.
Speaking on insurgency, US ambassador said that it takes an effective counter-insurgency policy to fight somebody who had entangled himself with the civilian population Boko Haram, saying that America has provided not only a military assistance but support to Nigeria’s economy in ensuring job creation via youth empowerment.

Monday, February 17, 2014

Tema workers want life-enhancing government actions

The Tema District Council of Labour (TDCL) has expressed concern about the hike in utility tariffs and other services making life unpleasant for workers and their families.
This was contained in a statement signed by Mr Wilson Agana, Chairman and Mr Ebenezar Kodwo Taylor, Secretary, and copied to the Ghana News Agency on Friday in Tema.
It said the actions of government including the arbitrary increase in the Value Added Tax (VAT), fuel price hikes; drastic fall off the cedi, the directive to freeze pay increase, and others was affecting workers.
In the statement, workers of Tema said they have observed with great concern the manner in which the Government was hiding behind the Automatic Adjustment Formula and the Public Utility and Regulatory Commission (PURC) to increase the tariffs without due regard to affordability, since workers pay has not been increased to match with the utility tariff increase.
“Workers of Tema are vehemently opposed to such practices” adding that, “price hikes in utilities renders the cost of doing business in Ghana very high since most industries thrive on manageable cost of production”
The TDCL also expressed concern about the arbitrary increase in VAT from 15% to 17.5%, and that, in the light of the economic hardship, it apparently portrays the Government as insensitive to the plight of the citizenry, as the prices of goods and services have risen very high.
In the statement, the workers observed that most of the pressure on the limited foreign currencies was as a result of the importation of finished petroleum products by Bulk Distribution Companies (BDCs) and requested that “the tide must be stemmed by ensuring that the Tema Oil Refinery (TOR) does all the refining”.
On water, the workers said it is suicidal for Government, who has the responsibility to provide the basic necessity of life to shy away from this responsibility by the thought of assigning pre-paid meters to potable water.
It said the workers of Tema also feel that denying the citizenry potable water through this policy will seriously promote health hazards such as outbreak of epidemics, stating that, the consequences will be unbearable.
“Water is life and there is no need to gamble with it at the detriment of our valuable citizens.”
According to the statement, the directive to freeze pay increases in 2014 concludes that government is very insensitive to the concerns and plight of workers.
“With reference to the above concerns, we are calling on the Trade Union Congress (TUC) and Organised Labour to call on government to immediately convene a National Tripartite Committee meeting to address the issue of the national daily minimum wage among others.”
On the TOR, the workers made an appeal to the President to expedite action on the reconstitution of the Refinery Board of Directors, which membership must include persons who understand the refinery operations and are also business minded with a vision of turning around the fortunes of TOR within the shortest possible time.
The workers called on government to honor its commitment of 37.7 million USD promised TOR
The TDCL also requested all stakeholders especially, SSNIT and the Bank of Ghana to clarify the sale of Merchant Bank to Fortiz. GNA

Friday, February 14, 2014

Markets take off

There have been a few mega deals reported recently, as sellers look to cash in on a rising market and buyers seek to increase their fleets.
For example, Diamond S Shipping is negotiating to buy 10 MRs newbuildings from Metrostar, being built at SPP for $38.5 mill each. They are due for delivery between 2014-2016.
This deal is subject to Diamond S Shipping’s recently announced IPO successfully raising the cash. Up to $100 mill worth of common stock could be sold in the offering, led by Jefferies and by BA Merrill Lynch, it was believed.
The company owns 33 product tankers- 30 of which were said to be timechartered out at firm rates in the $16,000’s, before profit sharing, with many tied up through 2015. Many of the vessels were purchased in 2011, from cash-strapped Cido Shipping.
In another large deal, Stena Bulk/Stena Weco, together with partner Golden Agri Resources (GAR), is to buy six 17,000 dwt chemical tankers for a total of about $100 mill.
Golden Stena Weco, which is a joint venture between Stena Weco and GAR, will be responsible for the commercial management of the vessels.
The main aim of the investment is to ensure that Golden Stena Weco has the necessary resources to meet its own transport needs and, by means of efficient commercial and operational management, to make shipments profitable despite the current relatively low market levels, Stena said.
The tankers were built at Samho Shipbuilding in 2008-2009. They have been renamed ‘GSW Forward’, ‘GSW Fabulous’, ‘GSW Frontier’, ‘GSW Fortune’, ‘GSW Future’, and ‘GSW Fighter’ and will join the’ Golden Avenue’ and her sister the ‘Golden Adventure’ in the jointly owned fleet.
“With the new investment in this segment, we are entering a new chapter in our collaboration with Golden Agri-Resources. These tankers will transport chemicals and vegetable oils on an international basis”, said Erik HÃ¥nell, president and CEO of Stena Bulk and Stena Weco president.
Meanwhile, the OSG vessels thought to be under negotiation for a sale to Euronav are the VLCCs – ‘Overseas Kilimanjaro’, ‘Overseas McKinley’ and ‘Overseas Everest’, plus the Aframaxes ‘Overseas Yellowstone’ and ‘Overseas Yosemite’.
Other sales reported recently by broking sources include MISC’s 1999-built sisters ‘Bunga Melati 3’ and ‘Bunga Melati 4’, sold to Wilmar Tankers on private terms. They have been renamed ‘Melati 3’ and ‘Melati 4’ respectively.
Scorpio was believed to have sold the 2008-built Aframax ‘STI Spirit’ to interests connected with NG Moundreas for $31 mill and the 1997-built Suezmax ‘Al Dawha’ was said to have been sold to Eastern European buyers for $12.5 mill.
There was also plenty of activity reported in the newbuilding market this week.
Brokers reported that Navig8 had invested in five, plus three optional LR1s at STX and four, plus four options at SPP, all for 2016 delivery.
Greek-based Oceanbulk was said to have ordered two VLCCs at HHI for $97 mill each, also for 2016 deliveries and Neda Maritime was thought to have ordered two, plus one option, LR1s at Sumitomo for 2H15 deliveries.
Maersk Tankers confirmed that the two MRs it had on options at Sungdong have been converted into firm orders. These follow four orders placed earlier. All of the vessels are expected to be delivered in 2016-2017.
Morten Engelstoft, CEO Maersk Tankers, said; “We believe that the product segments have a reasonable chance of returning to attractive rates in the coming years and in order to stay relevant and attractive in these markets, we need to gradually renew our fleet to maintain a suitable average age.”
In the timecharter sector, Tsakos has confirmed a charter extension has been signed on a 2004-built Handysize for another 12 months.
The new charter extension commenced this month and is expected to generate gross revenues of about $6 mill during the period, TEN said without naming the vessel, or the charterer.
Concordia Maritime has signed an agreement with Shell Tankers Singapore covering the employment of the P-MAX tankers ‘Stena Penguin’ and ‘Stena Progress’.  The rate was not revealed.
Also reported fixed were the LR1s ‘Stena Chios’ and ‘Stena Chronos’ to Cape Tankers for 12 months’ trading at $14,250 per day each.
BP was thought to have fixed the VLCC ‘Maersk Sara’ for 15-16 storage duties for $25,000 per day.
Cargill was said to have fixed the MR ‘STI Opera’ for a four month timecharter at $19,000 per day and also took the MR ‘Ardmore Seavaliant’ for 12 months at $17,100 per day. These are confirmations of earlier reports.
Koch was thought to have extended the MR ‘Prisco Elizaveta’ for another 12 months at $14,850 per day.
In the Handysize sector, Trenaco was thought to have fixed the ‘Andreas’, ex ‘Atlantic Liguria’ for 12 months at $13,250 per day, while Shell was believed to have fixed the ‘Faquet’ for 12 months, option 12 months, for $12,500-$13,500, respectively.
Reported leaving the fleet was the 1993 VLCC ‘New Vitality’. No other details revealed. Another VLCC, the 1989-built ‘Sri Qadriah 1’ was believed committed to unknown breakers for $430 per ldt on the basis of ‘as, is’ Singapore.
The 1994-built Handysize ‘Breeze A’ was said to have been sold to breakers on the basis of ‘as, is’ Nakhodka.

Thursday, February 13, 2014

OPEC says North Sea oil output to hit new lows.

Britain's oil production from the North Sea is expected to fall this year to new lows not seen since the early 1970s in a fresh blow to Alex Salmond's economic plans for Scottish independence. 
In its latest closely watched market report published Wednesday, the Organisation of Petroleum Exporting Countries (Opec) said that projected output from the North Sea in 2014 could fall to an average of 800,000 barrels a day (b/d) of crude, a fall of 70,000 b/d from 2013 when output hit its lowest average since 1977.
"UK oil production has fallen from a peak of close to 2.82m b/d in 1999, when the country’s net exports were 972,000 b/d. Until recently, the UK’s mature North Sea fields have seen decline rates averaging around 6pc a year. However, oil output slumped by more than 17pc in 2011 and 14pc in 2012 to less than 1m b/d, exacerbated by heavy maintenance and unplanned outages," said OPEC in the 107-page document.
OPEC's poor assessment for the prospects of North Sea production will come as a further blow to Mr Salmond who has argued that exploiting oil resources will be enough to sustain Scotland's economy if he is successful in September's referendum. According to Mr Salmond's figures, the region's remaining oil reserves will be worth £300,000 per person.
In an exclusive interview with The Telegraph in October, Opec Secretary General Abdalla Salem el-Badri warned that North Sea "oilfields" were depleted and that an independent Scotland would be unthinkable.
A drop in forecast oil production from the North Sea also also comes a day after it emerged that George Osborne, the Chancellor, is set to rule out a currency union with an independent Scotland.
Seperately, OPEC has forecast stronger global oil demand this year as economic growth picks up boosting demand for energy. The group of 12 major oil producers said on Wednesday that demand will rise by 1.09m barrels a day in 2014, an increase of 45,000 b/d on its previous forecasts bringing total world consumption to 90.98m b/d of crude.
Established in 1960, the Vienna-based Organisation of Petroleum Exporting Countries sets the tone for world oil markets by deciding how much crude to pump into the system. Its decision to raise its forecasts for oil demand will once again raise concern that investment in new production will again fall behind consumption forcing oil prices higher.

Lonrho to Start $600 Million Ghana Port to Lure Oil Rig Business

Ghana oil rig

Lonrho Plc will start building a $600 million port in Ghana as a hub to service oil rigs in West Africa, where Exxon Mobil Corp. and Royal Dutch Shell Plc pump 60 percent of Africa’s crude, in the second half of the year.
The port will be built in 25 months and the government will take a 10 percent stake in the Atuabo Freeport, Steven Gray, development manager, said in an interview on Feb. 10. Ghanaian companies will own about 35 percent and Lonrho and other foreign companies will have a 55 percent stake, he said. London-based Lonrho, which operates hotels and ports, hired Africa Finance Corp. to secure financing before the end of the first half of the year, he said.
“It’s strategically located to be able to support the growing oil and gas industry in the West Africa region to as far as Mauritania,” he said. The port “will help cut the cost of repairs to rigs which takes up to 20 days to travel from West Africa to ports in South Africa.”
Exploration and production activity is rising in West Africa, where Gabon, Nigeria, Ghana and other countries produce more than 3 million barrels of oil daily. Companies have increased the number of rigs being used in the Gulf of Guinea and nearby waters 20 percent in the past year, according to Baker Hughes Inc., the Houston-based field services company said in its monthly report of rigs.
Ghana plans to boost oil production fivefold to 500,000 barrels a day within 10 years and its neighbor Ivory Coast has said it will drill about 10 wells this year as part of a plan to boost output to 200,000 barrels daily through 2019. Tullow Oil Plc, which operates Ghana’s offshore Jubilee field, is exploring for oil in Guinea and Mauritania.
To contact the reporter on this story: Ekow Dontoh in Accra at
To contact the editor responsible for this story: Antony Sguazzin at

Wednesday, February 12, 2014

Trading houses in race to buy oil majors' $3 bln Nigeria assets-sources

* Shell (30 pct), Total (10 pct), Eni (5 pct) selling stakes
* Bids due from shortlisted suitors on Feb. 18
* Blocks produced avg 90,000 bpd of oil in 2012 - document
* Glencore, Mercuria in consortiums shortlisted - sources
ABUJA, Feb 12 (Reuters) - Commodity trading houses Glencore and Mercuria are among the shortlisted consortiums expected to make final bids on Nigerian energy assets worth around $3 billion that three oil majors are selling, sources close to the process say.
Trading houses have been marketing Nigeria's crude oil and importing fuel there for decades. New upstream acquisitions would help cement their relationship with Africa's biggest oil producer, a key supplier to Europe and India.
Shell is selling its 30 percent stake in four oil blocks, with France's Total and Italy's Eni also set to profit from their 10 percent and 5 percent shares. The Nigerian National Petroleum Corporation (NNPC) owns the remaining 55 percent.
Shell is also selling the 97-km (60-mile) Nembe Creek oil pipeline, which has been regularly attacked by oil thieves.
Final bids for the stakes in the blocks are due on Feb. 18, the sources said.
Total, Eni and Shell declined to comment. Bidders are bound by a confidentiality agreement and all firms as well as other parties mentioned in this story either declined to comment or did not respond.
Shell has already made $1.8 billion from asset sales in Nigeria since 2010 as several oil majors choose to cash in on onshore fields in the Niger Delta, where divestment is increasingly popular due to oil theft and a government drive to increase local ownership.
Oil majors are still keen to keep the largest and most profitable Niger Delta fields and infrastructure, and want to expand in Nigeria's deep offshore areas.
There is high demand for assets in the Niger Delta, which holds a large portion of Nigeria's 37 billion barrels of oil reserves. The oil is high-quality, relatively easy to drill, and some Nigerian companies have said they can better handle the security challenges faced by oil majors.
Shell has kept the specifics of the assets it is selling secret, but information from a confidential company document and from sources involved in the process reveals new details.
The consensus of five sources is that the combined 45 percent stake in blocks OML 18, 24, 25 and 29 is worth around $3 billion but could fetch even more due to inflated values put on assets in a country with an increasingly wealthy elite.
The blocks' combined output averaged 90,000 barrels of oil and 60 million standard cubic feet of gas per day (scf/d) in 2012 and they hold reserves of 4.6 billion barrels of oil equivalent, the Shell report seen by Reuters said.
A 30-year lease on these blocks was renewed in 1993, the document said. Shell has held a stake in them for decades longer and it is unclear how much the firm originally paid.
OML 29 is the most coveted asset, producing a peak of 62,000 barrels per day (bpd) of oil and 40 scf/d of gas and holds reserves of 2.2 billion barrels of oil equivalent (boe), the report said.
The 45 percent stake in this block could earn $1.5 billion to $2 billion, the sources said.
OML 24 holds 803 million boe, OML 18 has reserves of 1.5 billion boe, although most of this is gas, while the smallest asset, OML 25, holds 157 million boe, the Shell report said.
The Nigerian sales are part of a wider plan by Shell to dispose of $15 billion of assets this year and next to streamline operations after a profit warning.

Due to Nigerian government policy to increase local oil and gas ownership, any foreign companies wanting to buy divested assets needs to partner in consortiums with Nigerian firms.
Glencore is preparing to bid in a consortium, which if successful would be its first inroad into Nigeria's upstream sector. Seplat, a Nigerian firm in which Swiss oil trader Mercuria and French explorer Maurel and Prom hold minor stakes, is among the shortlisted bidders, sources said.
Africa's richest man, Aliko Dangote, is part of a shortlisted consortium, two of the sources said. Dangote is seeking to expand his vast business empire into the energy sector. He has pledged to build a $9 billion refinery in Nigeria and needs oil reserves to run it.
Nigerian firm Greenacres, whose chairman is former Shell Nigeria boss Basil Omiyi, has partnered with Canadian company Oracle Energy to bid on the blocks, the sources said.
Firms that have done deals on Shell blocks previously are also in the mix, they said. These include London-listed Heritage Oil, which will bid with the Bayelsa Oil Company in their new joint venture, Petrobay. Eland Oil and Gas is shortlisted too, the sources said.
Nigeria's First E&P, Sahara Energy, South Atlantic Petroleum and conglomerate Transnational Corp are separately bidding as is a consortium involving rapidly growing local oil trading firms Taleveras and Aiteo, the sources said.
Choosing the right buyer, rather than the highest bidder, can be crucial to securing sales, in a country where political influence can decide deals and legal disputes can scupper them.
U.S. energy company Chevron is embroiled in a legal battle over its own sale of three Niger Delta blocks. ConocoPhillips has been trying to close a $1.79 billion deal for over a year as Nigerian buyer Oando struggled to raise the cash, although Oando said this month it had secured financing.
The Niger Delta has had a host of security challenges since oil production began there more than 50 years ago. In 2006, militants claiming to be fighting for a fairer share of oil revenues cut out a third of Nigeria's production by sabotaging pipelines. Now, widespread oil theft can shut in as much as 400,000 bpd of the country's 2.5 million bpd capacity.
Whichever company buys Shell's blocks will have tricky negotiations with NNPC over who operates the fields. The state firm wants its producing arm NPDC to operate more reserves but oil companies would prefer to have control over the work.