Wednesday, February 24, 2010

American Indian reservation reaping oil benefits

By JAMES MacPHERSON, Associated Press Writer James Macpherson, Associated Press Writer – Wed Feb 24, 8:40 am ET
NEW TOWN, N.D. – An oil boom on American Indian land has brought jobs, millions of dollars and hope to long-impoverished tribal members who have struggled for more than a century on the million-acre Fort Berthold Indian Reservation.

In little more than a year, oil companies have put dozens of money-producing rigs on remote rolling prairie and sprawling badlands that are home to small cattle ranches and scattered settlements of modular housing. Although other tribes around the nation have oil interests, industry officials said none has likely experienced a recent windfall of this scale.

The reservation is occupied by the Mandan, Hidatsa and Arikara tribes, known as the Three Affiliated Tribes, who were placed in west-central North Dakota by the federal government in the 1800s — long before anyone knew of the oil.

"If they knew there was billions of barrels of oil here, they would never have put us here," said Spencer Wilkinson Jr., general manager of the Four Bears Casino on the reservation.

"There is probably more opportunity here than people have had in their lifetimes," said Marcus Levings, chairman of the Three Affiliated Tribes. Roads are now sometimes clogged with traffic, including Hummers and expensive pickup trucks. The local casino is buzzing with free-spending locals. And tribal members who had moved away to find work are now moving back for the abundant good-paying jobs.

Tribal officials say the oil has helped right a wrong done to the tribes in the 1950s, when more than a tenth of the reservation was flooded by the federal government to create Lake Sakakawea, a 180-mile-long reservoir.

Oil companies are now drilling beneath the big lake, using an advanced horizontal drill technique. Recently completed regulatory paperwork removed the last obstacle.

Since the boom began, lease payments of more than $179 million have been paid to the tribe and its members on about half of the reservation land, tribal record show. Millions of dollars more in royalties and tax revenue are also rolling in.

Levings said the tribe will use its money to pay off debt, and bankroll such things as roads, health care and law enforcement.

The reservation contains portions of six counties, covering more than 1,500 square miles. It lies atop a portion the oil-rich Bakken shale formation, which the U.S. Geological Survey estimates holds 4.3 billion barrels of oil that can be recovered using current technology. The agency said the Bakken was the largest oil deposit it has ever assessed.

In addition to the oil money, the tribes get $60 million to $70 million in federal aid annually from the federal government.

"This is an opportunity for us to help ourselves as much as we get help," Levings said. About 4,500 of the approximately 12,000 tribal members live on the reservation, one of about 300 in the United States.

State demographer Richard Rathge said 28 percent of people on the reservation were living in poverty in 2000, the latest figures available. More than 40 percent did not have a job at that time.

The opening of the casino in the 1990s added about 200 jobs. But oil's impact has been huge. "Anybody who wants to work can work," said Levins, with jobs available on rigs and in support industries such as oil supplies and trucking.

The reservation was the last area to be targeted by companies in the state's oil patch because of onerous federal requirements. But a 2008 tax agreement standardized the rules for oil drilling.

Dozens of wells have been drilled and more than 500 could be operating within five years.

Lovina Fox hopes at least one winds up on her land near Mandaree, a town of about 500 on the reservation. Lights from nearby drill rigs and flares burning off excess gas already illuminate her home.

"Everybody knows everybody here," she said. "If people are getting rich they're not saying anything and keeping it hush-hush. But it's not hard to figure out who's getting money — it's the people who have haven't worked in years and all the sudden, they're driving new vehicles."

Tribal member Rose Marie Mandan, who admits to earning "a nice little cushion" from oil payments, said she moved away from the reservation more than 50 years ago to find a job, then returned after retiring. "In the 1950s there were no jobs here," said Mandan, 80. Now she's seeing tribal members moving to the reservation for work.

Chuck Hale worked as a roughneck in other states before returning to his home near New Town to take a good-paying oilfield job. "It's tough work and it's damn cold," Hale said. "But it's worth it."

Mandan worries about the effects of the instant wealth. "It can be good but only if people know how to use the money," she said.

Wilkinson Jr., the casino general manager, said casino revenue jumped from $4.5 million in 2008 to $7.2 million in 2009.

He said he had advised tribal elders "to have fun at the casino but don't spend it all there. I've told them to invest it in something useful, like ... their house and kids and grandkids, and send them to college."

Will Nigeria's ailing leader return to power?

By Paul Armstrong, CNNFebruary 24, 2010 -- Updated 1341 GMT (2141 HKT)
President Umaru Musa Yar'Adua with U.S. Secretary of State Hillary Clinton last year.STORY HIGHLIGHTS
Unclear whether Umaru Musa Yar'Adua will resume duties
Yar'Adua has been treated for inflammation of tissue around the heart
His three month absence created a power vacuum in Nigeria
Nigeria is one of the world's leading oil producers
Umaru Yar'Adua
Saudi Arabia
(CNN) -- Nigeria's political landscape was shrouded in mystery Thursday as its ailing President, Umaru Musa Yar'Adua, returned to the country after months abroad receiving medical treatment.

Earlier this month, Nigeria's House and Senate approved a resolution to install the country's vice president, Goodluck Jonathan, as head of state amid fears over Yar'Adua's future.

With uncertainty over whether Yar'Adua will attempt to return to power, CNN looks at the implications for this oil-rich country.

Why did President Yar'Adua leave Nigeria?

Yar'Adua went to Saudia Arabia in November to be treated for inflammation of tissue around the heart, a condition that was diagnosed after he complained of chest pain.

Yar'Adua, 58, said at the time he did not intend to resign while in Saudi Arabia, but no further news came from the president for almost two months until January 13, when he gave the BBC an interview from his hospital bed.

In a frail voice, he sought to assure his countrymen that he was getting better and intended to return soon to power.

What was the reaction in Nigeria?

Until Jonathan's appointment, Africa's most populous nation had been on the brink of a constitutional crisis that threatened to bring the country to a standstill at a time when it is facing a number of challenges, not least the insurgency in its oil rich Niger Delta region.

Some observers said Yar'Adua's absence created a power vacuum, while demonstrators took to the streets of the nation's capital, Abuja, to demand a constitutional order on his absence and evidence about his true state of health.

Nobel Prize winner for literature, Wole Soyinka, even accused the ruling People's Democratic Party (PDP) of taking advantage of the president's absence. "The issue is that certain elements within the ruling party love this hiatus, they love the headlessness of government because they can proceed to loot and create their own little empires while the president is away," he said.

Who is Yar'Adua and where is he now?

Abdullah Aminchi, Nigeria's ambassador to Saudi Arabia, said the president's health had improved considerably and that he went back to Nigeria on Tuesday.

Agence France-Presse reported that two planes landed in succession -- one of them believed to be an air ambulance -- amid heavy security at the presidential wing of the international airport in Abuja.

Read the full story

Formerly the governor of the remote northern Katsina State, Yar'Adua swept to power in 2007 promising to tackle corruption, endemic in the country, and the unrest in the Niger Delta.

Backed by predecessor Olusegun Obasanjo as the PDP's presidential candidate, his election marked the first time in Nigeria one democratically-elected leader had taken over from another.

Will he return to power?

Though Jonathan must cede power to Yar'Adua upon his return, if he's medically capable of performing his duties, a presidential adviser was quoted by as saying it was unlikely he would immediately resume office.

Has there been any reaction to the President's return?

According to Nigerian newspaper, NEXT, the country's senate made no reference to President Yar'Adua's health or return during its Wednesday session. But the newspaper added that the news of his arrival is causing "a lot of anxiety in Abuja especially among politicians, many of whom had prepared themselves for a post Yar'Adua era."

In an effort to retain her ailing husband's grip on power, NEXT claimed Turai Yar'Adua had been "surreptitiously orchestrating an elaborate power scheme and was, in effect, running the affairs of the country."

It said it had evidence that Yar'Adua and her "cabal" of loyalists had succeeded in warding off all efforts to fill the leadership vacuum and thereby frustrated constitutional processes.

Why does Nigeria matter?

With a population of almost 150 million people, Nigeria is the largest country in Africa and accounts for 47 percent of West Africa's population, according to the World Bank. Its population is made up of about 200 ethnic groups, 500 indigenous languages, and two major religions -- Islam and Christianity.

With an economy dominated by oil, Nigeria is the 16th biggest producer of crude oil in the world, according to the CIA's World Factbook. In 2002 oil and gas exports accounted for more than 98 percent of export earnings and about 83 percent of federal government revenue, according to the U.S. State Department.

However production in its oil-rich Niger Delta region has been seriously disrupted by armed militant groups fighting for the redistribution of Nigeria's oil wealth.

The Movement for the Emancipation of the Niger Delta (MEND), an umbrella organization for many of these groups, wants oil cash to be reinvested in the region instead of enriching those whom they consider corrupt politicians

Nigeria’s Jonathan Must Fix Oil Investment, Security

By Dulue Mbachu

Feb. 24 (Bloomberg) -- Nigeria’s acting president, Goodluck Jonathan, faces two challenges in keeping crude output from shrinking in Africa’s biggest oil producer: guns and cash.

Jonathan, appointed to the helm of Africa’s most populous nation in place of ailing President Umaru Yar’Adua by parliament on Feb. 9, needs to calm a four-year-old insurrection in the Niger River delta and raise funds to expand the oil industry, according to analysts at Eurasia Group and PM Consultancy.

Nigerian oil production rose 16 percent in the six months through January, according to Bloomberg estimates, and will need to rise a similar percentage again to reach levels last seen at the end of 2005. Immediate priorities for Jonathan include sustaining a government amnesty for militant fighters in the delta and applying “coherent policies and actions” to bring in more investment, said Ann Pickard, Royal Dutch Shell Plc’s executive vice president for Africa.

“The amnesty will only survive if we can get jobs to the delta,” Pickard said at an oil and gas conference in Abuja yesterday. Dependent on oil and gas exports for more than 80 percent of government revenue, Nigeria needs to encourage energy investment and use it “as a springboard to diversify the economy in the future,” she said.

The two issues converge at Shell’s Forcados-Yokri project, part of a joint venture with the state oil company, Total SA and Eni SpA, to gather 85 percent of natural gas flared off in Shell’s Nigerian operations. Scheduled for completion in 2006, it was abandoned due to militant attacks, and now that relative peace has returned, “there are no funds and the project remains stalled,” according to a report on Shell’s Web site.

Ethnic Ijaw

Maintaining the peace in the oil-rich Niger delta may be the easier challenge for Jonathan, who is an Ijaw, the dominant ethnic group in the region. His “appointment will support the delta peace process and recent positive developments there,” Sebastian Spio-Garbrah, Africa analyst at Eurasia Group in New York, said in a Feb. 10 note to clients.

Armed attacks, including kidnapping of oil workers and sabotage of installations during the past four years, has cut production as much as 28 percent and put a damper on new energy projects.

President Yar’Adua’s amnesty for militant gunmen in the delta last year brought a lull in the fighting as well as hope that negotiations could satisfy the region’s demands for greater control of the oil wealth.


Jonathan still has to win over the main militant group, the Movement for the Emancipation of the Niger Delta, or MEND, which called off its three-month “indefinite cease-fire” on Jan. 30, citing lack of progress in talks in Yar’Adua’s absence.

MEND said it will cooperate with Jonathan only if its demand for local control of the delta’s energy resources is met, regardless of the fact that he’s an Ijaw.

“The truth is that we’re not sentimental over the origin of the president,” MEND spokesman Jomo Gbomo said in an e- mailed response to questions by Bloomberg. The group is “more concerned about any individual that can emancipate the region from five decades of bondage.”

If he can keep the guns relatively quiet, he still has to address Nigeria’s problem of under-investment in oil and gas.

Nigeria increased crude output to 2.2 million barrels a day this month, of which 700,000 barrels a day is from deep offshore fields, Petroleum Minister of State Odein Ajumogobia said yesterday.

Onshore Production Hurt

Oil produced onshore and in shallow swamp waters, where militant attacks are more frequent, is now 1.5 million barrels a day, according to the minister, down from 2.5 million a day in 2005. Completing a so-called “flares out” project to shut oil fields where associated natural gas is still vented into the atmosphere, may also reduce production, he said.

OPEC member Nigeria is faced with the choice of investing now or risking a decline in output within 15 years, according to state-owned Nigerian National Petroleum Corp., or NNPC. Shell, Exxon Mobil Corp., Chevron Corp., Total and Eni operate joint ventures that produce most of Nigeria’s oil and gas in which NNPC holds an average 59 percent stake.

Nigeria has been providing an average of about $5 billion a year in investments in the joint ventures, while its share has tripled to $18 billion this year since 2002, according to figures published by the NNPC. The money was mostly spent on keeping production going, not exploration, it said.

The country’s oil reserves have declined to 32 billion barrels, from 36 billion in 2001, and farther away from a target of achieving reserves of 40 billion and export capacity of 4 million barrels a day by 2010, according to Victor Briggs, general manager for planning at NNPC.

Oil Bill

Yar’Adua’s solution was to talk peace with the militants while introducing a bill to reform the way oil investments are funded.

Under the Petroleum Industry Bill awaiting passage in the legislature, independent joint ventures able to raise investment capital from financial markets, will replace the current joint ventures and free the government from the need to make direct capital contributions.

International oil companies have protested Nigeria’s plans through the bill to raise oil royalties and taxes, which they say will discourage capital-intensive investments in Nigeria’s deep offshore Atlantic waters.

If the bill is passed in its current form “approximately $50 billion won’t be invested as planned” in Nigeria by international energy companies, said Shell’s Pickard. The proposed bill is a “cumbersome document that lacks insight into the very basics of our industry,” she said.

Policy Defended

“Nothing is further from the truth,” Pedro Van Meurs, head of Petrocash, a Nassau, Bahamas-based consulting company and an energy policy adviser to the government, said today at an oil and gas conference in the Nigerian capital, Abuja. Changes sent to the legislature in a memorandum two days ago make terms for Nigeria’s deepwater “very competitive and in line with international deepwater terms,” he said.

Yar’Adua, who left three months ago for medical treatment in Saudi Arabia, returned to Nigeria this morning. While the president’s health has improved, Jonathan will continue to act as president as Yar’Adua continues his recovery, his spokesman Olusegun Adeniyi said in an e-mailed statement today.

While Jonathan may feel the “pressure to do something,” he is likely to be “constrained” by the fact that he’s not the official president, said Antony Goldman, head of London-based PM Consultancy that specializes in risk analysis of West Africa’s oil states.

Persistent leadership uncertainty and the slow legislative process may mean that necessary steps won’t be taken quickly, said Goldman. “And when that happens you allow what was already a bad system to become worse,” he said.

--Editors: Stephen Voss, Mike Anderson

To contact the reporter on this story: Dulue Mbachu in Lagos at +234-1-271-8547 or

To contact the editor responsible for this story: Stephen Voss at +44-20-7073-3520 or

Total May Invest $20 Billion In Nigeria

Gordon Wilcox
Total (NYSE: TOT), Europe's third-largest oil company, may invest $20 billion in Nigeria, according to Acting President Goodluck Jonathan's office. Total did not confirm the agreement, but is already an active producer in Nigeria.

The French company said recently it has been encouraged by Nigeria's efforts to bring stability to its oil-rich Niger Delta where militant rebels have frequently attacked pipelines and other oil assets.

Nigeria, an OPEC member, is Africa's second-biggest oil producer behind Angola. Total pumped about 230,000 barrels per day of crude in Nigeria during 2009. Nigeria primarily produces light sweet crude oil, which is more easily refined than sour crude.

Tuesday, February 23, 2010

Schlumberger to buy Smith International. Drilling companies unite.

By Kathrine Schmidt
Staff Writer

Published: Tuesday, February 23, 2010 at 11:43 a.m.
Last Modified: Tuesday, February 23, 2010 at 11:43 a.m.
( page of 2 )

HOUMA — The world’s largest oil-service company will buy another firm that specializes in drilling bits and chemicals, company executives said Monday.

Schlumberger Ltd. will buy the Houston-based Smith International for $11 billion.

“Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide,” Andrew Gould, Schlumberger’s chairman and CEO, said in a written release. “We believe this transaction brings significant benefits to the customers and shareholders of both companies, and we look forward to welcoming Smith employees to Schlumberger.”

Local calls to the corporate and local offices of both companies went unreturned Monday.

Schlumberger has a significant presence in the Houma-Thibodaux area, with five divisions in Houma and one in Larose, its Web site says.

Directory listings show at least two Houma offices for Smith International.

“This transaction brings our shareholders significant value and the opportunity to integrate with and own a meaningful share of a recognized technology leader in an extensive number of fields,” John Yearwood, CEO of Smith, says in a release.

Oilfield-service companies have increasingly diversified to provide their customers with a wider range of products and services, keeping costs down in the process, says Pierre Conner, a stock analyst with Capital One Southcoast in New Orleans.

“There’s a trend towards service companies being able to supply the complete range of products and services,” Conner said. “The (oil-and-gas) prices are volatile, you can’t control them. The best thing to do is reduce costs.”

No. 3 oil-service player Baker Hughes’ acquisition of BJ Services last year is another example, he said.

Conner said Smith is strongly concentrated in North American markets and best known for its drilling-bit and oil-tool technology. That will help strengthen services offered by Schlumberger, which already has a strong presence in directional drilling, a technique that mines oil from harder-to-reach deposits.

While he can’t say for sure, Conner said he doesn’t see the merger as one that will result in mass layoffs. That’s because the technologies being brought under the company umbrella are new.

“Most of the duplication is going to be at the corporate level,” he said.

Staff Writer Kathrine Schmidt can be reached at 857-2204 or

Crack Spreads Widen as Refineries Close in the U.S. / Paris also!

By Dinakar Sethuraman

Feb. 1 (Bloomberg) -- As refineries from New Jersey to New Mexico close at the fastest pace in three decades, traders in Singapore are profiting from a new plant on India’s west coast and a ship heading for Florida filled with jet fuel from Taiwan.

That means higher profits for oil companies and traders in Asia, where consumption is growing 13 times faster than in Europe and the U.S. That’s also why Morgan Stanley can buy jet fuel in Taiwan and ship it 11,500 miles to Port Everglades, Florida, and still make money.

“Fundamentally Asia is now at the center of the physical oil products business, and in a few years Singapore can emerge as a major paper-trading center” for derivatives contracts, not just physical oil cargoes, said Akira Kamiyama, a Tokyo-based trader at Mitsui & Co., Japan’s second-biggest commodity supplier.

Oil consumption in Asia will grow 3.3 percent this year, compared with 0.26 percent in Europe and the U.S., where no new refineries have been built since 1976, according to the International Energy Agency in Paris. North American refiners will leave about 25 percent of plants idle by 2014, the IEA forecast in June.

U.S. Decline

The estimates for rising refinery profits in Asia would mark the biggest jump since 2003, when rates increased 89 percent to $3.95 a barrel from a year earlier, according to Deutsche Bank AG. The Frankfurt-based bank recommends investors buy Reliance Industries Ltd., the biggest refiner in India, and China Petroleum & Chemical Corp., or Sinopec.

As energy demand improved in Asia, Reliance jumped 58 percent in the past year to 1046.55 rupees in Mumbai trading, while Sinopec advanced 47 percent to HK$6.03 in Hong Kong. Valero Energy Corp., the biggest independent U.S. refiner, tumbled 24 percent to $18.42 in New York.

Valero is suffering after the crack spread from processing three barrels of crude into two barrels of gasoline and one of heating oil tumbled 46 percent in the past year in New York trading. The refinery margin will decline another 29 percent to $5.31 for December delivery from $7.47 a barrel for March, futures contracts on the New York Mercantile Exchange show.

Asia Growth

Refinery crack spreads fluctuate based on regional economic growth, fuel production and oil demand. China’s economy will expand 9.5 percent and India’s by 8 percent, outpacing the 2.7 percent growth in the U.S. and 1.2 percent in the Euro-region, according to forecasts compiled by Bloomberg.

Contracts in Singapore that reflect the return from breaking Dubai crude into diesel may climb to about $10.76 a barrel in the first quarter of 2011 from $7.75 in March, according to data by PVM Associates.

Reliance’s new Jamnagar refinery, on India’s west coast, and China started up about 800,000 barrels a day of capacity in 2009. Another 1.5 million barrels may come on stream this year, with a majority in the two countries, JPMorgan Chase & Co. said in a note to clients in December.

New refineries are the biggest risk to rising profits, as producers increase supply of gasoline and diesel fuel.

Surplus to Ease

“The surplus in global refinery capacity will ease slightly from 2009 but not enough to signal a sharp margin rebound,” said David Hurd, an analyst at Deutsche Bank in Hong Kong.

Mumbai-based Reliance operated its Jamnagar refinery complex, the world’s largest, at 96 percent of capacity in the first nine months of its fiscal year, representing 1.19 million barrels a day. China ran its refineries at about 83 percent capacity in December and processed record amounts of crude, according to government data.

Asian refiners are taking market share as decades-old plants are closed for good in the developed world. India more than doubled its exports of petroleum products to the U.S. last year after Reliance started its export refinery, according to tanker data from Clarkson Research Services Ltd. in London.

At least 610,000 metric tons of gasoline (5.19 million barrels) was shipped to the U.S. from India, enough to supply the country for about a half a day, Clarkson data show.

Jet-Fuel Cargo

Morgan Stanley is moving a cargo of jet fuel from Taiwan to Florida, according to two people familiar with the matter. The vessel Torm Carina passed through the Panama Canal on its 11,500-mile voyage and was heading for the Gulf of Mexico.

Royal Dutch Shell Plc of The Hague and San Antonio-based Valero led companies that shut 1.05 million barrels of daily capacity last year in North America and Europe, with another 1.32 million likely to close this year, Bank of America’s Merrill Lynch unit said in a Jan. 14 report.

Sunoco Inc. will permanently shut its idled 145,000 barrel- a-day Eagle Point refinery in New Jersey. Chief Executive Officer Lynn Elsenhans said the Philadelphia-based company took the action to “improve our overall competitiveness” given weak industry dynamics.

Europe’s biggest refiner, Paris-based Total SA, plans to halt refining operations at its idle Flanders plant permanently after the recession curbed demand for fuels.

“I don’t see the possibility that the refinery will restart,” Total’s head of refining Michel Benezit said today in a telephone interview. “It makes no sense to continue refining when there are no clients.”

French Consumption

The plant represents 137,000 barrels of capacity, or 7.2 percent of French crude consumption.

“In a Darwinian fashion, this materially aids margins for surviving refiners,” said James Schofield, an analyst at Bank of America Merrill Lynch in London.

The last time the refining industry contracted this much was the early 1980s, coinciding with four years of declining oil demand following crude’s surge after the Iranian Revolution.

Companies may need to close another 2 million barrels a day of capacity for refining margins to go back to the “golden era of the 2005-2008 average,” according to Soozhana Choi, head of commodities research in Asia at Deutsche Bank in Singapore.

U.S. refineries are curtailing operations, preventing a glut and limiting losses. Refineries ran at 78.4 percent of capacity in the week ending Jan. 15, according to the U.S. Energy Department. That was the lowest level since at least 1989, excluding instances when hurricanes halted Gulf Coast operations.

Low Rates

“We expect the U.S., Europe and Japan to continue running at low utilization rates as demand is not picking up yet,” said Brynjar Erik Bustnes, an analyst at JPMorgan in Hong Kong. “This will leave the Asian refiners capable of maintaining a higher run rate and also enjoying slightly better margins.”

Saudi Arabian Oil Co., the world’s biggest crude producer, is exporting about 1 million barrels a day to China, more than to the U.S., Chief Executive Officer Khalid al-Falih said in an interview in Davos, Switzerland.

“Asia is really the only one with all the economies pulling out of the recession and with industrial activity increasing,” said Vivek Mathur, an analyst focusing on Asian oil and petrochemicals at Energy Security Analysis Inc., a Wakefield, Massachusetts-based energy research firm. “The overarching view is that this increasing economic activity is bolstering crack spreads.”

--With assistance from Tara Patel in Paris, Paul Burkhardt in New York, Winnie Zhu in Shanghai, Christian Schmollinger in Singapore and Archana Chaudhary in New Delhi. Editors: Clyde Russell, Dan Stets

To contact the reporter on this story: Dinakar Sethuraman in Singapore at +65-6212-1590 or

To contact the editor responsible for this story: Clyde Russell at +65-6311-2423 or

BASE METALS: Comex Copper Extends Loss After US Confidence Data

By Allen Sykora


Copper futures extended their early losses Tuesday after a weaker-than-forecast reading on U.S. consumer confidence also sent stocks lower.

At 10:17 a.m. EST (1517 GMT), the March copper contract is down 7.50 cents, or 2.27%, to $3.2315 per pound on the Comex division of the New York Mercantile Exchange. May, which has the most open positions, is down 7.65 cents, or 2.30%, to $3.2520.

The metal fell in overnight trading, and research notes from several analysts mainly tied this to gains by the U.S. dollar. This tends to pressure copper by making it more expensive in other currencies.

The euro fell after the German Ifo sentiment index fell to 95.2 this month from 95.8 in January instead of rising to 96.4 as forecast. The common European currency is at $1.3551, compared to $1.3593 late Monday.

Around mid-morning in New York, May copper hit a low for the day of $3.2485 a pound.

"It dipped on the consumer confidence," said one New York trader.

This also sent stocks lower, and the concerns about the economy that bogged down equities also hurt copper.

The Conference Board, a private research group, said its index of consumer confidence declined to 46.0 this month from a revised 56.5 in January. The February reading was far below the 54.8 expected by economists surveyed by Dow Jones Newswires.

Copper had already been ticking lower this week as some of the "euphoria" from last week's rally faded, said the trader.

"There are concerns, perhaps even fears, about the situation with the world economy," he said.

Stephen Platt, analyst with Archer Financial Services, said some pressure may have come early in the day from overnight weakness in Chinese equities. Lower stocks are often seen as a sign of possibly softer economic conditions that in turn could mean less demand for copper.

Platt said there also may be some skepticism about whether further economic stimulus will occur in the U.S.

"The market is easing back in the absence of any fresh bullish news and any real evidence of strong physical demand at these price levels," he said.

Any buying by copper users lately appears to be "hand to mouth" in which they are purchasing for their immediate needs rather than buying more during the market's recent rise, Platt said.

Traders are awaiting Federal Reserve Chairman Ben Bernanke's testimony before congressional panels Wednesday and Thursday for any clues on when policy makers might start hiking interest rates.

Platt put nearby support for May copper at $3.20 and $3.14 a pound. He put initial resistance around $3.30 to $3.32, then $3.40 to $3.44.

-By Allen Sykora, Dow Jones Newswires; 541-318-8765;

U.S. crude oil stocks down by 63,000 barrels: API

By Nick Godt NEW YORK (MarketWatch) -- U.S. inventories of crude oil fell by 63,000 barrels in the week ended Feb. 12, the American Petroleum Institute reported on Wednesday. Analysts polled by Platts expected a 1.65-million-barrel build in crude supplies for the week. The API also reported distillate stocks rose by 1.283 million barrels, while inventories of gasoline rose by 1.428 million barrels. Analysts polled by Platts expected an increase of 1.5 million barrels in gasoline stocks and a decline of 1.6 million barrels in distillate supplies. Crude oil for March delivery fell 9 cents, or 0.1%, at $77.24 a barrel in electronic trade.

Oil must serve as agent of good, says Jonathan! Thoughts?

By Bassey Udo

February 23, 2010 02:14AM

Operators of Nigeria’s oil and gas industry should ensure that oil is used as agent of national development rather than impoverishment of the people, Acting President, Goodluck Jonathan, has said.

Mr Jonathan, who declared open the 10th Nigeria Oil and Gas (NOG) Conference in Abuja, said a situation where a majority of Nigerians are denied the benefit of constant supply of electricity amid the capacity of the nation’s petroleum industry to guarantee uninterrupted gas supply is unacceptable:

“For Nigeria to be exporting natural gas and yet does not have the vital resource for domestic power generation is like a farmer who after a bumper harvest sells off all his produce, spends the proceeds on other material things and consigns the family to living in hunger. It is not and will never be a wise proposition,” he said.

He challenged oil companies to recognise their responsibility to be good neighbours to the people.

“We cannot live in darkness when we have a better option of a life under uninterrupted power supply. We must have electricity in Nigeria, and the oil and gas companies will have to partner with the government in delivering this to the Nigerian people within the shortest possible time,” he said.

The goal of the government, he said, is to ensure that the benefits of petroleum are seen to be enjoyed by all Nigerians, adding that the present administration has identified a number of critical areas that must be accomplished in order to usher in a new era for the oil and gas industry in the country.

Pass the bill

He said the primary task is to ensure that the Petroleum Industry Bill (PIB), currently pending before the National Assembly, is passed into law as the new law in central to the energy sector reform agenda of the federal government.

Acknowledging that the nation’s petroleum industry cannot make any significant progress without an effective review of the existing petroleum laws, he urged lawmakers to expedite work on the passage of the bill, reiterating government’s commitment to implement its provisions when passed.

“The operation of the oil industry in the last 50 years threw up a number of social challenges, which if not addressed, will become an unacceptable diversion in the country’s march to development,” he said, pointing out that the amnesty programme was targeted at those who decided to pick up arms in protest against the oil industry.

He said the challenge of rehabilitation and reintegration would be met by the holistic development of the Niger Delta region, urging the erstwhile armed militant youths who heeded government’s call for them to lay down their arms for peace and progress that their sacrifice would not be rewarded with indifference and neglect.

Shell slams Nigeria's oil reform bill, says it 'lacks insight'

By Joel Olatunde Agoi (AFP) – 5 hours ago

ABUJA — Anglo-Dutch oil group Shell Tuesday criticised Nigeria's oil bill fashioned to reform the oil and gas sector, saying mistakes in it, if passed into law, will take years to correct.

"The simple, passionately stated priorities of government have been completely lost in a cumbersome document that lacks insight into the very basics of our industry," Shell's vice president for Africa Ann Pickard said.

"If passed in the form currently proposed, its mistakes will take years to correct," Pickard told participants at the Nigeria oil and gas conference, warning the country could lose billions of dollars in investment in the next decade.

The oil producers believe "the bill will effectively end investment into Nigeria's deepwater."

"The analysis suggests that -- no matter which version of the bill you look at all or almost all proposed deepwater projects between now and 2020 will become uneconomic... approximately 50 billion dollars wouldn't be invested as planned," she said.

She said that the bill should address issues of multiple taxes and royalties among a litany of concerns of the international oil companies (IOCs) and other stakeholders before it is passed.

The bill is still before the national assembly where 56 changes suggested by the IOCs were being taken into account, junior oil minister Odein Ajumogobia said.

"The federal government does not want to worsen the investment climate in Nigeria. The few changes that have been made are to improve the bill," he said.

"Nigeria is too rich to be poor. Let us build on our mutual resources, people and vision to get the policy and actions in our industry right," added Pickard.

Acting President Goodluck Jonathan told the delegates his government was committed to comprehensive reform of the sector.

"We have come to a new era of partnership, built on trust, shared values and beneficial equitable interest," he said.

"I want to reassure ... our foreign partners of our unwavering commitment to pursuing the reform in this sector with an eye on our national interest primarily and also in meeting the market demand for energy," he said.

Lawmakers from some of the oil-producing states and rights groups blasted the bill for failing to address the environmental, social and human rights impacts of the oil industry.

Shell's boss meantime reiterated the oil giant's decision not to pull out of Nigeria.

"Take it from me, Shell has no plans to pull out," she said, in reaction to recent media speculation.

Pickard said Shell had achieved a lot since 2005, including supplying of more than three quarters of Nigeria's domestic gas and building a new power plant that increased national grid capacity by about 20 percent.

But she lamented that Nigeria's oil production has fallen in recent years.

Its "share of global oil production is shrinking with it -- it has fallen just over 30 percent since 2005," she said.

Shell, one of the main oil operators in Nigeria, has seen part of its almost one million barrels per day output cut because of strife in the Niger Delta, where militia movements claiming to represent the interests of local people have attacked oil installations and kidnapped oil workers.

At the peak of the attacks, the violence slashed Nigeria's overall crude production by about one million barrels a day, which saw Angola overtake it as Africa's top oil producer.

She said that Angola, among other countries, catching up with Nigeria.

The southern African country has drilled more oil wells than Nigeria in the past decade, she said.

"Angola... has eclipsed Nigeria in performance over the last decade. It has drilled more exploration wells than Nigeria every year since 1999 except one," she said.

Nigeria: Acting president promises oil overhaul


ABUJA, Nigeria

Nigeria's acting president on Monday called for the passage of a bill that analysts say would sharply reduce the profits of foreign oil companies.

Acting President Goodluck Jonathan said the Petroleum Industry Bill before lawmakers would allow more oil money to return to Nigeria's people. The bill would also require the government-run Nigerian National Petroleum Corp., to seek profits like a private business and not rely on government subsidies.

"Oil must be an agent for good and development not violence, war and impoverishment," Jonathan said at an oil and gas conference in Abuja, Nigeria's capital. "Our goal is to ensure that the benefits of petroleum be enjoyed and seen to be enjoyed by all Nigerians."

Jonathan's message is unlikely to be well received by companies exploring for oil off Nigeria's coast and its restive Niger Delta. Analysts have warned that the bill will cut drastically into oil companies' profits and make it uneconomical for them to continue their work in the nation.

Foreign oil companies Chevron Corp., ExxonMobil Corp. and Royal Dutch Shell PLC all have subsidiaries operating oil fields in Nigeria.

Jonathan said the proposed bill will also ensure that revenues from exploration are shared equally across the nation -- including the Niger Delta where militant violence and oil thefts have cut Nigeria's oil production by about 1 million barrels a day.

Militants demand the federal government send more oil money to Nigeria's southern region, which remains poor despite five decades of oil production.

Jonathan's comments also come as foreign oil companies are complaining government approval for their leases has stalled since President Umaru Yar'Adua left the country to receive medical treatment abroad.

While ExxonMobil already had its Nigerian oil field licenses renewed, Shell and Chevron still are in negotiations with the government. Shell also has announced its desire to sell off its rights to three oil fields.

Nigeria's is the third largest oil exporter to the U.S., behind Canada and Mexico.

Monday, February 22, 2010

How Nigeria lost billions of naira to discretionary allocation of oil blocks

Last week‘s revelation by former Minister of Defence, General Theophilus Danjuma, about how he sold an oil block for $1bn and netted $500m was a confirmation of how people in position of power benefited immensely from the oil block allocations based on the whims of Nigeria‘s rulers especially under military regimes.

In that process, billions of naira that could have accrued to the government in signature bonuses reflecting the value of the oil blocks were waived for much lesser amounts.

Signature bonuses are paid when an investor bids for an oil block, wins it and signs a contractual agreement with government.

A former top official of the Ministry of Petroleum, who was involved in some of the deals, said. ”You don‘t have to know anything about the business, all you need is just to have the ear of those in government and you can get an oil block.”

According to him, the idea was to get the allocation, assess the hydrocarbon deposits the block contains and sell the block to the oil firms who are the only one in the position to exploit.

Under successive military governments, especially those of Ibrahim Babangida and Sani Abacha, many connected Nigerians, including government ministers, top military officers, politicians and business figures got oil blocks under the discretionary allocation procedure.

It was gathered that at that time, there was no transparent bidding process and if there was any bidding at all, it was done under the table with Nigerians not told the signature bonus paid and the criteria used to select the block winners.

According to a retired Senior Official familiar with a few of the deals, ”Some of them were lucky to strike oil in their fields while some were not that lucky.”

”What happens is that when you get the block, you will get some seismic data from the Department of Petroleum Resources. You may also need to do more studies. There are some companies abroad that can still sell you some data on Nigerian blocks. So, after that, if the block is proven to have oil reserves after data interpretation, you may sell your interest to some foreign companies and pocket millions of dollars.

”Those who got such allocations were not always lucky. Some got fields that did not have oil then or that were full of gas and not oil and they had to abandon the fields after spending a lot of money.”

However, some of those who got oil blocks through discretionary awards did strike it big. For instance, Danjuma‘s South Atlantic Petroleum Limited got Oil Prospecting Licence 246 located in the deepwater from the Abacha government

Today, the field had started producing crude oil and SAPETRO had sold most of its interest to Total.

In February 2005, the block was converted to Oil Mining Lease 130 and thereafter the Federal Government took back part of it through the Nigerian National Petroleum Corporation. In June 2006, SAPETRO divested part of its contractor rights and obligations to China National Offshore Oil Corporation.

Also, Malabu Oil and Gas, a company linked with former Petroleum Minister, Chief Dan Etete, got a block, OPL 245 in April, 1998, still under the Abacha government. The block was also quite juicy and a signature bonus of $20m was supposed to be paid but the company could only pay $2m and then entered into agreement with Shell Ultra Deep in which Shell then agreed to pay $165m for 40 per cent stake in the block and also pay $18m as the remaining balance of the signature bonus.

Although the agreement did not hold eventually, had it worked, Malabu would have pocketed over $140m in profit from an investment of just a bit over $2m while still holding 60 per cent of the stake.

With the coming of Obasanjo, however, the Federal Government introduced the open bidding arrangement, which was generally applauded as though not perfect but a transparent way of auctioning the oil blocks rather than the discretionary allocation method.

At present, to own an oil block, companies have to undergo a bidding process in which the block goes to the highest bidder. However, under the Right of First Refusal arrangement, some blocks are offered to investors willing to invest in downstream projects, power projects or infrastructural projects.

A senior DPR official admitted that the nation could have made much more money if the blocks awarded through discretionary allocation had been awarded through the open bidding process. For instance, many analysts believed that OPL 246 could have been auctioned for about $200m, given the hydrocarbon reserves in the field. In the 2005 bid round, Indian company, ONGC Videsh, had offered $310m for OPL 323, a deepwater field, which may not be as big as OPL246.

The Federal Government, through the Department of Petroleum Resources had introduced the open competitive bidding process in 2000 and about $222m, was realised from the auctioning of the oil blocks then.

In the 2005 bid round, when the process was again applied, about $1bn was realised, while $504m and $502m were earned by the Federal Government during the 2006 and 2007 licensing rounds respectively.

Forty-five blocks were put on offer in the 2007 round. The winners, most of which applied as Nigerian companies, were consortiums that comprised local and foreign firms.

President of the Trade Union Congress, Mr. Peter Esele, said the discretionary allocation system under the military gave room for government officials to award oil blocks to their friends and loss of revenue for the government.

”When Danjuma said he made $500m after selling his stake in Akpo field and did not know what to do with the money, it only showed the poor quality of leadership we have been having in the country. That $500m is enough to build a refinery. We have to do something about the tax regime so that people with big idle cash are taxed heavily, ” he said.

Chairman, Lagos Zone, Petroleum and Natural Gas Senior Staff Association of Nigeria, Rev. Folorunso Oginni, said that the award of the block to Danjuma under discretionary allocation was not properly done adding that that was how the nation‘s assets were sold cheaply to people in government.

Gasoline Heading Above $3 A Gallon By This Summer

NEW YORK February 22, 2010, 12:10 pm ET Retail gas prices likely bottomed out last week, and they're again headed to above $3 a gallon this summer, experts said Monday.

Pump prices typically rise this time of year as refineries switch to a more expensive grade of gas. But this year, prices are increasing after millions of Americans received pink slips and kept their cars in the driveway.

"If you look at demand, it's just abysmal," said Fred Rozell, retail pricing director at Oil Price Information Service.

What's pushing prices higher isn't American consumption. It's the crude oil that's used to make motor fuel, Rozell said. Crude is an international commodity that's become ever more expensive as demand grows in China.

Retail gas prices rose Monday for the fifth straight day, adding less than a penny overnight to a new national average of $2.648 a gallon, according to AAA, Wright Express and Oil Price Information Service.

A gallon of regular unleaded is still cheaper than it was a month ago. It's also 73.1 cents more expensive than the same time last year.

Even though prices are climbing, motorists shouldn't expect a return of the price spikes of 2008, when gasoline jumped above $4 a gallon in some parts of the country. Americans simply aren't burning enough fuel to push prices that high, Rozell said.

"I'll be surprised if it got over $3.25," he said.

Benchmark oil for March delivery slipped 3 cents Monday to $79.78 a barrel on the contract's final day of trading on the New York Mercantile Exchange. Most of the trading volume already has shifted to the April contract, which added a penny at $80.07 a barrel.

In other Nymex trading in March contracts, heating oil rose less than a penny to $2.0779 a gallon, and gasoline gained 1.63 cents at $2.102 a gallon. Natural gas dropped 19 cents to $4.854 per 1,000 cubic feet.

In London, Brent crude gave up 21 cents to $77.98 on the ICE futures exchange.

India IOC buys more Nigerian crude oil for Ap. GLENCORE!!!

NEW DELHI/LONDON (Reuters) - State-run Indian Oil Corp (IOC) bought 4 million barrels of Nigerian crude oil and 1 million barrels of Masila crude in its latest tender for April lifting, trade sources said on Friday.
The sources said India's largest oil refiner bought one Very Large Crude Carrier (VLCC) containing 2 million barrels of Nigerian Qua Iboe from trader Glencore and another VLCC of 2 million barrels of Nigerian Escravos crude from Chevron.

IOC also bought a 1 million-barrel cargo of Masila crude from Nexen, the sources said. All the crude was for loading in April.

Other trade sources said Glencore sold the Qua Iboe at an fob price of around dated BFOE plus $1.50 per barrel, while Chevron sold the Escravos at around dated BFOE plus $1.30 per barrel fob. There was no word on the price for the Masila.

None of the companies identified as sellers was available for immediate comment.

IOC had already bought 4 million barrels of West African crude oil for April loading via a previous tender.

On February 4, IOC bought 1 million barrels each of Nigerian Yoho, Erha and Escravos crudes and another 1 million barrels of Equatorial Guinean Zafiro. All those barrels were supplied by oil trader Vitol for April loading, traders said.

IOC, which operates 10 refineries across India with a total capacity of 1.204 million bpd, tenders several times a month to buy crude oil, mainly West African barrels.

China’s Crude Oil Imports to Drive Tanker Market, Poten Says. 4 mill bbls a day!

By Dinakar Sethuraman

Feb. 22 (Bloomberg) -- China, the world’s second-largest energy consumer, may lead an increase in demand for tankers as its energy needs rise, Poten & Partners said in a report.

The country’s imports of crude oil in the spot market have increased fivefold over the past 10 years to the equivalent of more than 55 Very Large Crude Carriers, or VLCCs, last year from 11 in 2000, the U.S. energy consultant said.

“China’s growing reliance on seaborne crude oil imports will set the tone of the tanker market for the coming decade,” Poten said in a report to clients dated Feb. 19. “China’s expanding middle class, strategic stockpiling and complex refining capacity ensure that it will continue to be a large ship, crude oil story.”

China’s crude oil imports may reach an all-time high this year as an economic recovery spurs demand for fuels, data from China National Petroleum Corp. showed on Feb. 4. The Chinese economy, which expanded at the fastest pace in the fourth quarter since 2007, will grow four times faster than the U.S. in 2010, the United Nations said in December.

Chinese charterers accounted for about 30 percent of VLCC spot fixture activity this year, up from below 5 percent a decade earlier, Poten said.

The nation set a January record for crude oil imports, with net shipments at 17.1 million metric tons last month, or about 4 million barrels a day, according to data by the General Administration of Customs on Feb. 10. That’s the highest for any January and 33 percent more than a year earlier.

Arabian Gulf

China relied on imports for more than half its crude oil needs last year. Its oil demand may grow 4.7 percent in 2010 to 8.9 million barrels a day, according to the International Energy Agency, and if demand reaches expected levels of 11.5 million barrels a day by 2015, it could lead to significant increases in ton-mile demand, Poten said.

Assuming that these incremental volumes are sourced from the Arabian Gulf, it could create demand for an additional 80 VLCCs to meet Chinese demand by 2015, according to the report. The Arabian Gulf accounted for more than 70 percent of Chinese imports since 2005.

“These barrels are likely to be sourced from farther away, resulting in even higher ton-mile demand,” Poten said. China’s strengthened relationships with future suppliers may contribute to the development of new tanker trade routes particularly from Atlantic Basin suppliers such as Angola and Brazil.

Beijing’s security of supply concerns over increasing imports are prompting attempts to ensure that 40 percent of the country’s oil is imported on Chinese-owned ships by 2015, Poten said. Chinese charterers and shipowners currently control less than 10 percent of the VLCC fleet, it said.

--Editors: Jane Lee, Clyde Russell.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at +65-6212-1590 or

To contact the editor responsible for this story: Clyde Russell at +65-6311-2423 or

Iraq does not expect OPEC output changes


Iraq's top oil official says prices are at satisfactory levels and does not expect OPEC to make changes to output during its meeting next month.

Oil Minister Hussain al-Shahristani told The Associated Press on Monday the 11-member Organization of the Petroleum Exporting Countries will instead discuss lackluster member compliance with output targets.

Al-Shahristani made the comments a few hours after benchmark crude for March delivery traded at about $80.32 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

OPEC announced a series of production cuts in the second half of 2008 that lowered oil output by 4.2 million barrels per day. The next OPEC meeting is set for March 17.

2nd UPDATE:Shell Sells 3 Nigeria Oil Blocks To Local Companies

By James Herron
LONDON (Dow Jones)--The Nigerian joint venture company operated by Royal Dutch Shell PLC (RDSB.LN) agreed Friday to sell its 30% interest in three oil production licenses that have been shut down since 2008 to a consortium led by local companies for an undisclosed sum, the venture said in a statement.

The deal shows how Shell is shifting its focus away from its troubled Nigerian heartland, although the company says it remains committed to the country and the asset sale is smaller than some industry observers expected.

The area includes about 30 wells with a production capacity of about 50,000 barrels of oil equivalent a day of oil and gas, the statement said. "Production is currently shut down awaiting completion of repairs to an export pipeline damaged in late 2008," it said.

A Shell spokesman wasn't able confirm the cause of the damage on the pipeline, although damage to infrastructure in the region from oil theft and militant attacks is common.

The buyer is a consortium comprised of Nigerian companies Platform Petroleum Limited and Shebah Petroleum Development Company Ltd. and France's Maurel & Prom.

"This transaction should be seen in the context of Shell's active portfolio management of its assets and interests across the world," said Mutiu Sunmonu, Managing Director of the Shell venture. "We have been in Nigeria for more than 50 years and remain committed to doing business here."

The licenses cover an area of 2,650 square kilometers in the northwestern Niger Delta and are held by Shell Petroleum Development Company of Nigeria Ltd., which is a joint venture between the Nigerian National Petroleum Company, Shell, Total SA (TOT) and Eni SpA (E).

The deal is subject to the approval of the Nigerian government and national oil company.

Shell has recently shifted focus away from its troubled Nigerian operations. Chief Executive Peter Voser said this month that he no longer expects the country, which has been one of Shell's heartlands for decades, to drive output growth for the company.

Violence, kidnapping and sabotage attacks on infrastructure in Nigeria's oil-producing areas have hampered Shell's operations for years. Despite a recent amnesty and a continuing truce between government forces and Niger Delta militants, violence persists.

A decision by a Dutch civil court last month also opened Shell up to potentially costly lawsuits related to oil spills in Nigeria.

Voser said in October that Shell's Nigerian oil output was down to 120,000 barrels per day from 300,000 barrels a day before the violence started.

Last month, a person familiar with the matter told the Wall Street Journal that Shell is seeking buyers for 10 of its Nigerian onshore oil producing assets worth between $4 billion and $5 billion in total. China National Petroleum Corp. has been reported as a possible buyer.

However, Shell is expected to renew the leases on its most significant oil producing areas in Nigeria soon, a senior government official told Dow Jones Newswires Wednesday.

Company Web site:

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317;

Oil agenda and Bush’s visit. Smile pretty for the camera!

L-R: US Ambassador to Nigeria, Robin Sanders , George Bush, Goodluck Jonathan, former US Secretary of State, Condoleezza Rice and Minister of Foreign Affairs, Ojo Maduekwe at the Villa in Abuja Yesterday
By Bassey Udo. February 22, 2010

United States of America’s insistence on establishing a military high command for Africa called AFRICOM in the Gulf of Guinea is not for the love of the continent, but principally for the lust for its oil resources.

Over the years, the U.S. has significantly increased its oil imports from Africa, mainly through most of its companies operating in Nigeria, Angola, and to a lesser extent from Equatorial Guinea, Sao Tome and Sudan.

The expectation of an average American is that by 2015 about 25 percent of its oil imports would come from Africa, essentially from the Gulf of Guinea. Therefore, any threat to sustained oil exploration and production activities in the region is, invariably, a direct threat to America’s interest.

Maintaining stability in the centres of oil production in Africa has remained a prime concern to the US.

The threat from China With China also venturing outside for other sources of oil to support its quest for solutions to its energy needs, the competition has heightened the pressure on the U.S. to safeguard its existing oil interests.

Therefore the many visits to Africa by top American businessmen and leaders, including erstwhile American President, George W. Bush, may not be unconnected with the ever-tougher competition from China for the control of the continent’s oil resources.

Most of the major oil exploration and production companies in Nigeria are of American origin. These include ExxonMobil Corporation and Chevron Nigeria Limited, which are respectively the second and third largest upstream operators in a joint venture with the Nigerian National Petroleum Corporation (NNPC).

ExxonMobil, which currently accounts for almost 600,000 barrels of oil per day, also has Esso Exploration and Production of Nigeria (EEPN), which is the deep offshore production arm of the corporation, in charge of Erha oil field, Nigeria’s second largest deep water oil acreage.

Similarly, Chevron, which produces about 400,000 barrels per day, also has a deepwater subsidiary, Star Deepwater, which operates the Agbami offshore oil field reputed to be one of Nigeria’s biggest oil concessions in recent times.

The Niger Delta challenge Since the breakout of crisis in the Niger Delta in late 2005,

following the launching of attacks on oil installations by armed militant groups in the oil region, the operations of these companies, along with others, have been seriously curtailed.

For more than a decade, the crisis appears to have defied resolution, thus deeming the prospects of America and its allies’ access to the region’s ‘sweet crude’, which has been their main source of energy for their industries.

Nigeria, the world’s sixth leading oil and gas producers, produces an average of 2.3 million barrels of oil every day, with prospects of raising the capacity to about 4.5million in the near future.

A leading member of the Organisation of Petroleum Exporting Countries (OPEC), Nigeria is America’s fifth largest supplier.

The U.S. consumes between 18 million and 20 million barrels of oil per day. With a proven pool of about 60 billion barrels from the Gulf of Guinea, with prospects of more supplies from the deep water discoveries, oil is certainly on the front burner of Bush’s visit agenda.

Observers say Mr. Bush would attempt to use the visit to open diplomatic talks with Nigeria on the possibility of helping to restore peace in the crisis-torn region, particularly at a time when the Federal Government’s amnesty programme appears to have been stalled as a result of the unceremonious absence of the ailing President, Umaru Musa Yar’Adua.

The programme initiated to help disarm, rehabilitate, mobilise and integrate erstwhile armed militant group leaders in the Niger Delta for constructive development engagement, recorded some significant positive benefits within the short period it was introduced, with oil production climbing gradually back to it’s the level prior to its take off.

With the coming of the Acting President, Goodluck Jonathan, there appears to be a glimmer of hope for America to move in to find a way of forging new alliances to protect its oil supply interests.

There is no better personality who would fit the bill of the assignment than Mr. Bush, whose interest in oil business dates back to 1978, when he, following his father’s footsteps, set up series of limited liability partnerships, including Arbusto Energy, in Midland, Texas for the primary business of drilling for oil. He was to later change Arbusto’s name to Bush Exploration, after a merger deal into Spectrum 7 Energy Corporation in 1984.

The Bush-controlled oil business eventually ended up being folded into Harken Energy Corporation, a Dallas-based corporation.

An oil industry source who pleaded anonymity yesterday night told NEXT ‘‘ The visit of Mr. Bush although not official because he came for a media event, should not be lost on all. He is an investor in the oil sector and would not allow such an opportunity to pass without discussing some form of oil business with the Acting President.’’

Niger Delta Group to Expose Oil Theft Syndicate

Harris-Okon Emmanuel
21 February 2010


Warri — Rivers State Governor, Chibuike Amaechi (middle), flanked by his wife, Dame Judith and leader of Action Congress, Tonye Princewill, during Mrs. Amaechi's 39th birthday ceremony at Government House, Port Harcourt... recently.

A group, Niger Delta Waterways Vigilante (NDWV), has reiterated commitment to fight against oil theft by exposing the various strategies being adopted by a syndicate that specialises in crude oil theft in the region, so as to bring sanity and clean environment to the riverside communities.

Speaking against the backdrop of recent threat to the lives of its members by the cartel involved in illegal bunkering after it exposed the strategy of obtaining Directorates of Petroleum Resources (DPR) approval to gain entrance to communities where these illicit deals were being perpetrated, the group said it will not be deterred by such threat.

Its spokesman, Chief Gabriel Okolosi, who reaffirmed the stand in a chat with newsmen in Warri, stated that its members are prepared to pay the ultimate prize to continue in the struggle to ensure that the activities of these crude oil thieves are exposed to save the nation from sabotage and consequent cost of millions of dollars it would have generated from the international oil market.

He said: "Besides putting an end to this act of sabotage being perpetrated by these enemies of the state, our mission will also bring relief to the indigenes of the affected communities who have had to contend with many years of pollution in their environment as a result of the activities of these criminals.

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"We have resolved that no amount of threat to the lives and property of our members can stop us from the goal we are set out to achieve. We can no longer allow criminally minded people to continue to subject our nation and people to act of sabotage and abject poverty for their selfish interest even at the expense of our lives."

It would be recalled that it was based on the alarm raised by this group of a new strategy of obtaining Directorates of Petroleum Resources (DPR) approval by the members of the syndicate that specializing in crude oil theft to gain entrance to communities used as loading points that led to the arrest of an Ocean going vessel, MV Shekinah and 17 crew members last week by the Joint Task Force (JTF) in Warri at the Escravos bar in Warri South West council of Delta State.

Those arrested had been handed over to the Economic and Financial Crime Commission (EFCC) by the JTF Command in Warri for further investigation and prosecution.

Nigeria to tackle reform, unrest at oil conference!

By Joe Brock
ABUJA (Reuters) - Stalled oil reform, domestic gas supply shortages and stability in the Niger Delta will be discussed at a key Nigerian oil summit in Abuja this week.

The annual Nigeria Oil & Gas Conference, which begins on Monday, offers the opportunity for the major players in Africa's biggest energy industry to give updates on current operations and contact potential investors.

Investors will be looking for reassurance on the outlook for oil and gas production at a time when Africa's most populous nation is suffering political uncertainty over the health of ailing President Umaru Yar'Adua and who will succeed him.

Nigeria's Acting President Goodluck Jonathan -- who took full executive powers two weeks ago, over two months after Yar'Adua left for medical treatment in Saudi Arabia -- has put peace in the Niger Delta high on his priority list.

Yar'Adua was the driving force behind an amnesty programme in the delta last year under which thousands of gunmen laid down weapons, an initiative which has brought more than six months without any major militant attacks on oil installations.

But Yar'Adua's absence has raised concerns about delays to the programme and militants have threatened to resume attacks unless the government demonstrates it can quickly get the amnesty programme back on track.

"On the one hand (Jonathan) wants to show he has militants' grievances in mind but of course he has to appease the oil majors and assure the security of oil production," said Kissy Agyeman-Togobo, West African analyst at IHS Global Insight.

Attacks on oil and gas installations in the Niger Delta in recent years have prevented the OPEC member from pumping much above two thirds of its 3 million barrels per day (bpd) installed capacity, costing it an estimated $1 billion a month in lost revenues, according to the central bank.

Nigerian crude is favoured by refiners in the United States and Europe because it is light and easy to process into fuel products. The instability helped push world oil prices to record highs near $150 a barrel in 2008.

For a FACTBOX on Nigerian oil output outages click here:


Royal Dutch Shell, Nigeria's oldest foreign oil partner, has been the worst hit by militant attacks and investors will be looking for details on the group's plans for any more divestments of its onshore operations in Nigeria.

Shell announced a month ago it had agreed to sell its stake in three onshore licences and Chief Executive Peter Voser said this month the company would be willing to sell more of its Nigerian assets if it made financial sense.

The Anglo-Dutch giant's regional executive Vice President, Ann Pickard, is due to address the conference, as are executives from U.S. giant Chevron, France's Total, local firm Oando and NNPC officials.

NNPC is the focus of an ambitious Petroleum Industry Bill (PIB), intended to break the state-owned firm into profit-driven units able to tap international capital markets.

But the legislation has been stalled by disputes between the government and foreign oil firms, which have warned the bill could threaten billions of dollars of investment if it goes ahead in its present form.

Under the current version, the government would be allowed to renegotiate old contracts, impose higher costs on oil companies and retake acreage that firms have yet to explore.

Oil Minister Rilwanu Lukman, junior oil minister Odein Ajumogobia and NNPC head Mohammed Barkindo are due to address the conference on the outlook for the country's oil industry and the impact on domestic energy supplies.

Despite sitting on the world's seventh largest natural gas reserves, Nigeria has been unable to meet local fuel needs, with the government often laying the blame at the feet of international oil companies (IOCs).

"Domestic gas supply is going to be high on the agenda at the conference," said Holly Pattenden, Head of Oil and Gas at Business Monitor International

"IOCs are going to become under more and more pressure to give their gas to the domestic market rather than export it through LNG (Liquefied Natural Gas)."

Delegates were due to arrive in Abuja on Monday with speeches, seminars and discussions due on Tuesday and Wednesday.

Tuesday, February 16, 2010

Nigeria eyeing Chinese oil money?

ABUJA, Nigeria, Feb. 16 (UPI) -- The Nigerian government could look to Chinese investors to as a revenue source for the country through a possible release of oil acreage, officials said.

The Nigerian government aims to increase its reserve capacity to 40 billion barrels of oil and raise productivity to 4 million barrels per day by the end of the year.

Nigeria would need to add major investors to do so, though previous efforts to attract outside players to energy sector in the oil-rich African nation failed to increase productivity.

Chinese investors have promised to invest as much as $50 billion in more than 20 licenses up for renewal, Nigeria's Next newspaper reports. Reserves at the licenses approach 6 billion barrels of oil by some estimates.

"If government has these acreages that they want to give out, if there are other people that have shown interest for them apart from the existing ones, well so be it," said Isaac Arowolo, the president of a petroleum trade association. "If they compete and win, it's good."

Political uncertainty and pervasive militant activity has created uncertainty in one of Africa's most oil-rich nations. The main militant group, the Movement for the Emancipation of the Niger Delta, ended its cease-fire recently and the government moved to place Goodluck Jonathan, the vice president, in power more than 80 days after President Umaru Yar'Adua left for medical treatment in Saudi Arabia.

Monday, February 15, 2010

Anvil to start copper output at Congo mine in 2011

CAPE TOWN, Feb 2 (Reuters) - Anvil Mining (AVM.TO) said on Tuesday it plans to start producing 40,000 tonnes of copper at its Kinsevere mine in the Democratic Republic of Congo (DRC) next year before increasing output to 60,000 tonnes of copper in 2012.

Anvil vice president for corporate affairs Robert LaValliere said the company's two other smaller copper units, Dikulushi and Mutushi, which were placed under care and maintenance following the global financial crisis would remain suspended until Kinsevere reaches full operational capacity.

"Our intention is to produce 40,000 tonnes of copper cathode at Kinsevere next year and we will reach 60,000 tonnes in 2012. We will then look at expansion and if there will be more resources, then we will expand further," LaValliere told Reuters on the sidelines of a mining conference in Cape Town.

LaValliere said Anvil completed a $200 million financing arrangement for the Kinsevere project in 2009 and the mine project was now in an advanced stage of construction.

LaValliere said two other Anvil copper projects in the DRC had been placed on hold until Kinsevere reaches full operational capacity and that the company's plan was to finance the projects from proceeds to be earned from Kinsevere mine. (Reporting by Shapi Shacinda; Editing by James Macharia)

Iran and Israel in Africa

A search for allies in a hostile world
Iran’s proclaimed ambitions in Africa are particularly worrying for Israel, which once had a lot of friends on the continent and wants to keep the few that remain
Feb 4th 2010 | DAKAR AND NAIROBI | From The Economist print edition

Illustration by David SimondsARRIVING at the airport in Senegal’s capital, Dakar, you have a fair chance that the newish-looking taxi taking you into town will not be the usual French or Japanese model, but Iranian. And it will not have been imported, as most cars in Africa are, but assembled in nearby Thi├Ęs. From here, the first few hundred taxis have just come off the production line at an Iranian-built Khodro plant. They are tangible symbols of a new power in sub-Saharan Africa that has, for some, begun to cause ripples of concern.

Mahmoud Ahmadinejad, Iran’s controversial president, is in the vanguard of Iran’s push. Two years ago in New York he said he saw “no limits to the expansion of [Iran’s] ties with African countries”. Last year Iran’s diplomats, generals and president criss-crossed the continent, signing a bewildering array of commercial, diplomatic and defence deals. By one tally, Iran conducted 20 ministerial or grander visits to Africa last year, reminiscent of the trade-and-aid whirlwind the Chinese brought to Africa in the mid-2000s.

The reason is not hard to fathom. Iran wants diplomatic support for its nuclear programme in parts of the world where governments are still biddable. In Latin America Iran’s president has already exploited anti-American sentiment in countries such as Bolivia, Nicaragua and Venezuela. In Africa, by contrast, where most countries have strong ties to the West, Iran has concentrated on strengthening Muslim allegiances with offers of oil and aid.

Take Senegal, a 95%-Muslim country. Though poor and quite small in population, it carries diplomatic weight in Francophone Africa and influence at the UN, where quite a few African governments look to it for a lead on some big votes. So Iran has been bombarding it with goodwill. As well as the Khodro car factory, the Iranians have promised to build tractors, an oil refinery and a chemical plant, as well as to provide a lot of cheap oil.

Senegal’s President Abdoulaye Wade has gratefully accepted this bounty, in return paying four official visits to Iran. In November he hosted Mr Ahmadinejad in Senegal, publicly assuring him that he endorsed Iran’s right to nuclear power—and accepted that this was for peaceful purposes only. A happy Iranian president also visited neighbouring Gambia, a smaller country with a nasty authoritarian regime—and a UN vote. Also in west Africa, Iran has been pushing into Mauritania and has tightened its links with Nigeria.

In east Africa Iran has helped turn Sudan, another mainly Muslim country, into—by some counts—Africa’s third-biggest arms maker; in 2008 the two signed a military co-operation accord.

Iran has also been cultivating some less likely allies in the region. Last year Mr Ahmadinejad visited mainly Christian Kenya, being joyously welcomed in the port of Mombasa, on the Muslim-inhabited coast. He struck a deal to export 4m tonnes of crude oil to Kenya a year, to open direct flights between Tehran and Nairobi, the two capitals, and to give scholarships for study in Iran. Wherever Iran has embassies it also sets up cultural centres. Iran has been trying to use its oil to get into Uganda too. On a recent visit to Iran, Uganda’s president, Yoweri Museveni, tantalised his hosts by hinting that they might consider building a refinery and pipeline for Uganda’s recently discovered oil.

Zimbabwe’s president, Robert Mugabe, has been courted too, along with sub-Saharan Africa’s diplomatic and economic giant, South Africa, whose ruling African National Congress has long shared Iran’s support for the Palestinians against Israel. Iran has for many years supplied South Africa with a lot of oil. But economic ties have tightened. Private South African companies are investing heavily in Iran. For instance, MTN, a mobile-phone company invested $1.5 billion-plus in Iran in 2007-08 to provide coverage for more than 40% of Iranians. In return, South Africa has been one of Iran’s doughtiest supporters at the UN, abstaining on a resolution to condemn Iran’s human-rights violations and arguing against further embargoes and sanctions over Iran’s nuclear plans.

Yet the amount of aid that Iran gives Africa is still small compared with the sums Americans and Europeans give, let alone China. It is doubtful that countries such as Senegal would jeopardise aid links with the West by becoming too cosy with Iran. And sometimes there is more Iranian talk than action. Kenya’s direct flights to Tehran have yet to happen. Khodro is producing only half the number of taxis promised. It may be hard for Shia Iran to influence Africa’s predominantly Sunni Muslims.

Can the Jewish state recover ground?
All the same, Israel is rattled. Its diplomatic links are fewer and frailer than before—and Iran is doing its best to shred even these. Last year Mauritania, one of the few Arab League countries to have diplomatic relations with Israel, told it to close its embassy. After Iran’s foreign minister visited the country, Iran said it would take over a hospital that Israel had been building in the capital, Nouakchott, adding that it would provide more doctors and equipment than Israel had promised. In Senegal the Israelis had offered to help the notable Sufi Muslim town of Touba to build a water and sewage system. But negotiations were abruptly broken off at an advanced stage, after Iran promised to carry out the same work—and give a bigger donation to the town as well as the water pumps.

Lebanon’s rich and influential diaspora also comes into the game. In Congo, Guinea and Senegal, among other countries, the Shia Lebanese party-cum-militia, Hizbullah, which Iran helps sponsor, collects a lot cash from its co-religionists, while spreading the Iranian word.

As a result of Iran’s African activity, Israel is trying to push back into the continent, where it had strong ties in the 1950 and 1960s. But many countries cut them after the Arab-Israeli wars of 1967 and 1973, and again when the first Palestinian intifada (uprising) began in the late 1980s. In September Israel’s foreign minister, Avigdor Lieberman, made Israel’s first high-level mission to Africa for decades, visiting Ethiopia, Ghana, Kenya, Nigeria and Uganda. Countering Iran’s influence was plainly one reason behind the trip.

Many African governments still crave Israeli expertise for projects such as irrigation, but they are also after military and intelligence technology. Security-minded Ethiopia, confronting Islamist militias backed by nearby rebels in Somalia, has become Israel’s closest continental ally and a big buyer of defence equipment. Kenya, also worried about Islamist fighters operating in next-door Somalia, has long been receptive to Israel’s blandishments. In west Africa, Nigeria may have spent as much as $500m on Israeli arms, including drones, in the past few years.

Mr Lieberman may tour Africa again this year. Israel is particularly worried by Iran’s eagerness to warm relations with Sudan and Eritrea, a strategic spot on the Red Sea that could threaten Israeli shipping. Eritrea also arms the fervently anti-Israeli Somali jihadists. Sudan may already serve as a conduit for Iranian weapons to Hamas, the Palestinian Islamist group that Iran backs, and to Hizbullah. A year ago Israeli aircraft destroyed a convoy in eastern Sudan that it said was carrying Iranian arms to Hamas in the Gaza Strip.

China - The worlds largest tanker sets sail

World’s largest tanker, built in China, ready to start maiden voyage

Claimed to be the most sophisticated large tanker ever designed and built by a Chinese shipyard, the ‘Xin Pu Yang’ is to start its maiden voyage from Guangzhou to the Middle East later this month, Chinese media reports said.
The 310,000 dwt tanker is believed to be the largest VLCC built for the domestic market thus far. According to Equasis, she is owned by Shanghai-based China Shipping Development Co.
Liu Yijun, an energy strategy specialist at China University of Petroleum, told the China Daily that foreign tankers are shipping more than 80% of China's crude oil imports. China currently imports over 50% of its crude oil needs
Captain Feng Wanyuan told the Chinese press that the pilot-less 333 meters long tanker is equipped with an automatic navigation system that can spare crew members from the navigation bridge and sail on automatic pilot for 24 hours in the worst weather.
She can sail at 16 knots and unload 300.000 tons of oil in 24 hours.
"Xin Buyang is by far the most advanced super-large oil tanker with a high level of automation and reliability in performance, featuring independent technology in design and construction," Feng said.
In response to the growing threat of Somali pirates attacking oil tankers, the tanker is equipped with high-pressure water cannons to fend off marauding attackers. Feng said the oil tanker will pass through the Gulf of Aden on its maiden voyage to the Middle East.
The tanker has installed an alarm system that will immediately send nautical information on the ships'' location to offshore operators within 35 seconds of an emergency.

OPEC Worries U.S. Economic Uncertainty Will Hurt Oil Demand

LONDON—Uncertainty about the pace of the U.S. recovery is putting oil-demand growth at risk for the world's largest crude consumer and is weighing on global consumption, the Organization of Petroleum Exporting Countries said Wednesday in its monthly report.

The warning, adding to OPEC's concerns about European countries such as Greece, suggests the group is likely to stick to its existing production quotas when it meets March 17 in Vienna.

"The 1% forecast growth in U.S. oil demand this year is facing a set of obstacles that could prevent it from materializing," the report said. "If this happens, then the U.S. oil demand might come flat if not negative for the total year," OPEC added. The U.S., which uses close to a quarter of the crude oil consumed worldwide each day, "is a key country to world oil-demand changes," the report said.

The organization also warned of "heightened fiscal uncertainties in the euro zone," with "the mounting public debt of some of its member countries, particularly Greece." Greece's budget deficit and debt load have put its sovereign bonds at risk of default, triggering credit-market jitters world-wide.

Fellow European Union partners are now considering a bailout. In the major industrialized countries, "the recovery is far from self-sustaining and remains largely dependent on continued government support," OPEC said. The organization, which has come under pressure in the past to increase production, may have a vested interest to paint a bleaker picture than consumer nations.

But its concerns follow last week's data from the U.S. Department of Energy that unexpectedly showed a weekly buildup in crude inventories as refineries continue to struggle with not enough demand. Despite its concerns, OPEC said Wednesday it was keeping its world oil-demand forecast unchanged for 2010, hoping that rising Chinese consumption will make up for any weakness in Western economies.

Global demand is still expected to average 85.1 million barrels a day this year, growing by 0.81 million barrels a day from last year. That would suggest a downgrade in demand growth of 10,000 barrels a day. In its previous report, OPEC estimated demand growth at 0.82 million barrels a day. But the expected rise in global consumption comes as OPEC members may already be outpacing demand growth.

While OPEC sees demand for its own oil at 28.8 million barrels a day on average this year, the group's production rose to 29.2 million barrels a day in January, up 63,200 barrels a day. The statistics, based on secondary sources, show compliance with production cuts agreed in 2008 has now fallen to 53.5% from 80% in March last year.

Higher production in Angola and Venezuela more than offset a drop in Nigeria's output, which fell by 124,000 barrels a day in January. There, militants in the Niger Delta restarted attacks on oil installations last month, shutting down some production for Royal Dutch Shell PLC and Chevron Corp.

Nigeria: Jonathan's upgrade to Acting President may not stem violence in oil region

The resurgent violence in Nigeria's oil region may continue despite the installation of a Niger Delta, Vice President Goodluck Jonathan, as Acting President, if indications from a militant group are anything to go by.

Vowing to continue fighting to liberate their people, the umbrella Joint Revolutionary Council (JRC) said the decision to make Jonathan Acting President was ''an illegality cleverly crafted by those who feel that Niger Delta is a conquered territory and can only be plundered and looted.

'The deserting act of (President) Alhaji Umaru Musa Yar'Adua can only be appropriately categorised as gross misconduct and should naturally have attracted an impeachment.

''This ought to have been followed by the swearing in of the Vice-President as substantive President, not in an acting capacity,'' JRC spokesman Bakabio Walter said.

Describing Jonathan as ''a lame duck ruler,'' JRC said: 'Whatever happens, we shall not allow anything to deter us in our resolve to wage a continuous revolutionary war to liberate all parts of our territory - not even a Jonathan Presidency. We are even more convinced more than ever before that a Niger Delta independence through armed struggle is the way forward.'

JRC claimed responsibility for the attack against a Shell facility in the oil region last week.

The region's largest militant group - Movement for the Emancipation of the Niger Delta (MEND) - has not reacted to the installation of Jonathan as Acting President.

The group in a statement said: "We are monitoring the unfolding drama and will react at the appropriate time."

MEND recently called off its ceasefire, saying the government's amnesty programme had failed to address the concerns of Niger Deltans and vowing to resume attacks aimed at crippling the oil industry.

Friday, February 12, 2010

SFL - Sale of VLCC. $58 mill for a VLCC from 1998. I want 2!

HAMILTON, BERMUDA, Feb 05, 2010 (MARKETWIRE via COMTEX) -- Press release from Ship Finance International Limited, February 5, 2010

Ship Finance International Limited /quotes/comstock/13*!sfl/quotes/nls/sfl (SFL 13.89, -0.13, -0.95%) ("Ship Finance" or the "Company"), today announced that it has sold the 1998-built VLCC Front Vista to a subsidiary of Frontline Ltd. ("Frontline") for total sales proceeds of $58.5 million.

Frontline has concurrently agreed to sell the vessel to an undisclosed third party with settlement by way of installments. This transaction is linked to a 10-year time charter to a state-owned oil company.

Ship Finance will receive net proceeds of approximately $22.1 million after prepayment of associated debt. The sale is expected to result in a book gain on sale of assets of approximately $1.8 million.

DJ India IOC Buys Two VLCCs Of Nigerian Crude For April - Trade

LONDON, Feb 12, 2010 (Dow Jones Commodities News via Comtex) --
Indian Oil Corp. (530965.BY) bought two very large crude carriers of Nigerian crude oil for April loading via its second spot tender, traders said Friday.

The company bought one VLCC of Escravos crude from Chevron Corp. (CVX) and one VLCC of Qua Iboe from Glencore International AG, traders said.

Each VLCC will comprise two standard 950,000-barrel cargoes, they said.

Further details on prices weren't immediately available.

In the first tender, the company bought two VLCCs of West African crude oil from Vitol. It bought one VLCC of Nigerian Yoho and Equatorial Guinea's Zafiro crude oil, and one VLCC of Nigerian Erha and Escravos crude oil.

IOC Thursday floated its third spot tender for sweet crude oil for April loading. The tender will close Feb. 16, with one-day validity.

-By Sherry Su, Dow Jones Newswires; +44(0)20-7842-9329;

(END) Dow Jones Newswires

Nigeria to Raise 867.5 Billion Naira to Fund Deficit

By Dulue Mbachu

Feb. 12 (Bloomberg) -- Nigeria plans to sell 867.5 billion naira ($5.74 billion) worth of bonds, about a fifth of planned expenditure this year, to fund the budget deficit, Abraham Nwankwo, director-general of the Debt Management Office, said.

“That is the minimum we’ll raise from the Nigerian bond market” in 2010, Nwankwo told reporters today in Lagos, the commercial capital.

Budget proposals now being considered by lawmakers envisage spending of 4.1 trillion naira this year. The planned sale of bonds is 66 percent higher than the 524.1 billion naira sold last year, according to figures presented by Nwankwo.

Nigeria, which depends on oil and gas exports for more than 80 percent of government revenue, has been striving to cover gaps in income caused by conflict in its southern oil region and a decline in crude prices since 2008. Armed attacks targeting the oil industry cut more than 25 percent of Nigeria’s crude exports between 2006 and 2009.

The West African nation also plans to reintroduce this year a $500 million international bond it suspended last year because of the global financial crisis, should it be approved by parliament, Nwankwo said.

Nigeria’s total public debt stock currently stands at 3.8 trillion naira, the equivalent of $25.7 billion, according to the Debt Management Office. Out of this figure, 85 percent is domestic debt of 3.2 trillion naira, while 15 percent, or $3.9 billion, is external debt, it said.

The ratio of Nigeria’s public debt to its gross domestic product of 20 trillion naira is 13.8 percent, compared to more than 50 percent before the country exited its Paris Club debts in 2005, Nwankwo said. Funds raised from bonds have been used to build roads, fund agriculture and buy new train engines to revive the country’s railways, he said.