Tuesday, July 31, 2018

Once oil wealthy, Venezuela's largest state struggles to keep the lights on

Lisney Albornoz (2nd R) and her family use a candle to illuminate the table while they dine, during a blackout in San Cristobal, Venezuela March 14, 2018. Picture taken March 14, 2018. REUTERS/Carlos Eduardo Ramirez 
 Lisney Albornoz (2nd R) and her family use a candle to illuminate the table while they dine, during a blackout in San Cristobal, Venezuela March 14, 2018. Picture taken March 14, 2018. REUTERS/Carlos Eduardo Ramirez

MARACAIBO, Venezuela (Reuters) - Across Maracaibo, the capital of Venezuela’s largest state, residents unplug refrigerators to guard against power surges. Many only buy food they will consume the same day. Others regularly sleep outside.

The rolling power blackouts in the state of Zulia pile more misery on Venezuelans living under a fifth year of an economic crisis that has sparked malnutrition, hyperinflation and mass emigration. OPEC member Venezuela’s once-thriving socialist economy has collapsed since the 2014 fall of oil prices. 

“I never thought I would have to go through this,” said bakery worker Cindy Morales, 36, her eyes welling with tears. “I don’t have food, I don’t have power, I don’t have money.” 

Zulia, the historic heart of Venezuela’s energy industry that was for decades known for opulent oil wealth, has been plunged into darkness for several hours a day since March, sometimes leaving its 3.7 million residents with no electricity for up to 24 hours. 

In the past, Zulians considered themselves living in a “Venezuelan Texas”, rich from oil and with an identity proudly distinct from the rest of the country. Oil workers could often be seen driving new cars and flew by private jet to the Dutch Caribbean territory of Curacao to gamble their earnings in casinos. 

Once famous for its all-night parties, now Maracaibo is often a sea of darkness at night due to blackouts.

The six state-owned power stations throughout Zulia have plenty of oil to generate electricity but a lack of maintenance and spare parts causes frequent breakdowns, leaving the plants running at 20 percent capacity, said Angel Navas, the president of the national Federation of Electrical Workers. 

People wait for public transportation in Maracaibo, Venezuela July 26, 2018. REUTERS/Marco Bello
Energy Minister Luis Motta said this month that power cuts of up to eight hours a day would be the norm in Zulia while authorities developed a “stabilization” plan. He did not provide additional details and the Information Ministry did not respond to a request for comment. 

The Zulia state government did not respond to a request to comment. 

Although Caracas has fared far better than Maracaibo, a major outage hit the capital city on Tuesday morning for around two hours due to a fault at a substation. The energy minister said “heavy rains” had been reported near the substation. 

Venezuelans were forced to walk or cram into buses as much of the subway was shut. Long lines formed in front of banks and stores in the hopes power would flick back on. The fault also affected some phone lines and the main Maiquetia airport just outside the capital. 

“This is terrible. I feel helpless because I want to go to work but I am in this queue instead,” said domestic worker Nassari Parra, 50, as she waited in a line of 20 people in front of a closed bank.


Retiree Judith Palmar, 56, took advantage of having power to cook one afternoon last week in Maracaibo. 

When the lights do go out, Palmar wheels her paralyzed mother outside because the house becomes intolerably hot. One power cut damaged an air conditioning unit, which Palmar cannot afford to replace on her pension of about $1.50 a month due to inflation, estimated by the opposition-run Congress in June at 46,000 percent a year. 

Outages are taking a toll on businesses in Zulia. 

Zulia used to produce 70 percent of Venezuela’s milk and meat but without power to milk cows and keep meat from spoiling, the state’s production has fallen nearly in half, according to Venezuela’s National Federation of Ranchers. 

Zulia’s proportion of Venezuela’s total oil production has also slipped over the past 10 years from 38 percent to 25 percent, figures from state oil company PDVSA show. 

Maracaibo, Venezuela’s second largest city, seems like a “ghost town,” said Fergus Walshe, head of a local business organization. He said businesses had shortened their operating hours due to the lack of power. 

“Before, business activity here was booming,” he said. 

Small businesses are also affected. In an industrial park in Maracaibo’s outskirts, 80 percent of the 1,000 companies based there are affected by the power cuts, according to another business association in Zulia. 

Sales at Americo Fernandez’ spare parts store are down 50 percent because card readers, which are crucial because even the cheapest goods require unwieldy piles of banknotes, cannot be used during power cuts. 

“I have had to improvise to stay afloat. I connect the car battery to the store so that the card readers can work,” Fernandez said during a power outage at his home, surrounded by candles. 

Reporting by Mayela Armas in Maracaibo, additional reporting by Andreina Aponte and Shaylim Castro in Caracas; Writing by Alexandra Ulmer; Editing by Lisa Shumaker and Alistair Bell

Monday, July 30, 2018

OPEC July oil output hits 2018 peak, but outages weigh: Reuters survey

LONDON (Reuters) - OPEC oil output has risen this month to a 2018 high as Gulf members pumped more after a deal to ease supply curbs and Congo Republic joined the group, a Reuters survey found, although losses from Iran and Libya limited the increase. 

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria June 19, 2018. REUTERS/Leonhard Foeger 
The Organization of the Petroleum Exporting Countries has pumped 32.64 million barrels per day in July, the survey on Monday found, up 70,000 bpd from June’s revised level and the highest this year with Congo added. 

OPEC and allies agreed last month to boost supply as U.S. President Donald Trump urged producers to offset losses caused by new U.S. sanctions on Iran and to dampen prices LCOc1, which this year hit $80 a barrel for the first time since 2014. 

On June 22-23, OPEC, Russia and other non-members agreed to return to 100 percent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent. 

Saudi Arabia said the decision would translate into an output rise of about 1 million bpd. 

OPEC’s collective adherence with supply targets has slipped to 111 percent in July from a revised 116 percent in June, the survey found, meaning it is still cutting more than agreed.


Following the OPEC decision, Kuwait and the United Arab Emirates raised output by 80,000 bpd and 40,000 bpd respectively in July, the survey found. 

The bulk of the Saudi supply boost appears to have been delivered in June as Riyadh tapped storage tanks to push supply to 10.60 million bpd, near a record high. The increase infuriated Iran and surprised other OPEC members with its scale.

Riyadh has boosted supply in July by a further 50,000 bpd from June’s revised level, the survey found, because domestic crude use in refineries and power plants has risen while exports have held close to June’s rate. 

Supply in Nigeria, often curbed by unplanned outages, rose by 50,000 bpd. Royal Dutch Shell’s Nigerian venture lifted force majeure on Bonny Light crude exports. Nigeria and Libya were exempt from the original supply-cutting deal. 

Iraq also increased supply as exports rose from the country’s southern terminals. 

Among countries with lower output, the biggest drop of 100,000 bpd was in Iran. Exports fell as returning U.S. sanctions discouraged companies from buying the country’s oil. 

Output in Libya, which remains volatile due to unrest, edged down. Fields in eastern Libya resumed production after a standoff at export terminals ended, but output was cut mid-month at the largest oilfield, Sharara. 

Production also slipped in Venezuela, where the oil industry is starved of funds because of economic crisis, and in Angola due to lower exports in July against a backdrop of natural decline at oilfields. 

The addition of Congo Republic to OPEC in June has added about 320,000 bpd to production and, coupled with the increases by existing members, has lifted OPEC output in July to the highest since October 2017 according to Reuters surveys. 

Before Congo joined, OPEC had an implied production target for 2018 of 32.78 million bpd, based on cutbacks detailed in late 2016 and Nigeria and Libya’s expectations of 2018 output. 

According to the survey, OPEC excluding Congo pumped about 460,000 bpd below this implied target in July. 

The survey aims to track supply to market and is based on shipping data provided by external sources, Thomson Reuters flows data and information provided by sources at oil companies, OPEC and consulting firms.

Sunday, July 29, 2018

Iran's rial hits record-low 100,000 to the dollar


Iran's currency hit a record low on Sunday of 100,000 rials to the dollar amid a deepening economic crisis and the imminent return of full US sanctions. 

The unofficial rate stood at 102,000 rials by midday, according to Bonbast, one of the most reliable sites for tracking the Iranian currency. 

The rate was confirmed by a trader who spoke on condition of anonymity to AFP. 

The rial has lost half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March. 

The government attempted to fix the rate at 42,000 in April, and threatened to crackdown on black market traders. 

But the trade continued with Iranians worried about a prolonged economic downturn turning to dollars as a safe way to store their savings, or as an investment in the hope the rial will continue to drop. 

With banks often refusing to sell their dollars at the artificially low rate, the government was forced to soften its line in June, allowing more flexibility for certain groups of importers. 

The handling of the crisis was one of the reasons behind last week's decision by President Hassan Rouhani to replace central bank chief, Valiollah Seif. 

The currency collapse was encouraged by the US announcement in May that it was pulling out of the 2015 nuclear deal, that lifted certain sanctions in exchange for curbs to Iran's atomic programme. 

The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran.

Friday, July 27, 2018

U.S. economy grows at the fastest pace since 2014

Donald Trump thumbs up


The second quarter was big for the U.S. economy.

In the second quarter, the U.S. economy grew at an annualized rate of 4.1%, almost double the 2.2% growth rate seen to start the year.

This marks the fastest pace of growth for the U.S. economy in any quarter since the third quarter of 2014.

This rate of growth, however, was less than what was forecasted by economists. Economists polled by Bloomberg expected the report to show the economy grew at an annualized rate of 4.2% in the second three months of the year.

Speaking from the South Lawn of the White House Friday morning, President Donald Trump boasted about the GDP numbers, saying that his administration has “accomplished an economic turnaround of historic proportions.”

“The most important thing,” Trump added, “is these [GDP numbers] are sustainable. This isn’t a one-time shot. I happen to think we’re going to do extraordinarily well in our next report…I think the numbers are going to be outstanding.”

At an event on Thursday, Trump said of the GDP number, “If it has a 4 in front of it, we’re happy.” 
In the second quarter, economic growth hit its fastest pace of growth since the third quarter of 2014. (Source: BEA)
Paul Ashworth, chief US economist at Capital Economics, said Friday, “Overall, helped by the massive fiscal stimulus, the economy enjoyed a strong first half of this year but, as the stimulus fades and monetary policy becomes progressively tighter, we expect GDP growth to slow markedly from mid-2019 onwards.”

Ian Shepherdson, an economist at Pantheon Macroeconomics, said following Friday’s report, “In one line: Looks great; won’t last.”

Shepherdson added, “Looking ahead, the big stories for Q3 will be the slowdown in consumption — Q3 probably was boosted by the tax cuts, but the incremental cashflow effect is now zero — and the reversal of the Q2 inventory and trade swings.”

Friday’s report also showed that personal consumption in the second quarter grew at an annualized rate of 4%, a major jump from the 0.5% pace of consumption growth seen to start the year.

Meanwhile core PCE prices, a measure of inflation, grew 2% quarter-on-quarter, less than expected and a slight deceleration from the 2.2% pace of price growth seen to start the year.

The acceleration in real GDP growth in the second quarter reflected accelerations in PCE and in exports, a smaller decrease in residential fixed investment, and accelerations in federal government spending and in state and local spending, the BEA said in its release Friday.

These movements were partly offset by a downturn in private inventory investment and a deceleration in nonresidential fixed investment. Imports decelerated.

The growth of inflation-adjusted personal income slowed somewhat in the second quarter, rising 2.6% against a 4.4% increase in the first three month of the year. The personal savings rate also fell in the second quarter, hitting 6.8% against 7.2% in the first quarter of the year.

Fuel Tanker: To scrap or not to scrap?

shipbreaking scrapping chittagong

Owners of older tankers face a dilemma. Tanker scrapping has been on the increase this year and in a recent interview, an executive from the demolition industry highlighted the main drivers for demolition in this sector.
These were freight rates forecasts, current scrap prices and the demolition activity in other shipping segments. Regulatory changes can also be a driver, particularly if there are significant rule changes on the horizon, Poten & Partners said in its weekly opinion piece.
For example, the phase out of single hull vessels between 1999-2003, pushed up demolition levels during that period.
At the moment, the requirement to install ballast water treatment systems and the IMO 2020 sulfur cap for bunker fuels are factors that owners need to consider.
Looking at each of these drivers to see how they may impact scrapping in the coming years, without regulatory mandates, the freight market has been (and always will be) the main driver for shipowners facing the decision whether to scrap a vessel or continue to trade it - not just the current market, but in particular the owner’s expectations for future earnings.
Tanker scrapping peaked in 1985 (at 10.5% of the existing fleet) after many years of dismal earnings had sapped owners’ confidence. Current spot earnings are also disappointing and are no doubt an important incentive for owners of older tonnage to consider selling their vessel for demolition.
Relative to modern vessels, older tankers frequently have to offer discounted rates to keep employed and still face lower utilisation, undermining their earnings even further.
However, unlike in the mid-1980s, earnings have not been very bad for very long and most owners don’t expect the market to stay depressed for a long period.
Other factors play a role. How about scrap prices? Do they really play a significant role in an owner’s decision? Historical data does not seem to bear this out. The two periods of elevated scrapping in 1992-1995 and 1999-2003 coincided with relatively low scrap prices.
The high scrap prices of 2004- 2008 occurred during the tanker super cycle, when scrapping was understandably low. Demolition picked up in 2009-2014, but that had more to do with the collapse in tanker rates after the global financial crisis than the relatively high scrap prices.
In general, scrap prices are hard to predict for owners and most assume flat scrap prices going forward. Obviously, owners will compare the scrap value with the resale value of a vessel and in challenging freight markets, the resale value tends to converge with the scrap value.
Other key factors that may drive tanker scrapping over the next few years are the new regulations around BWTS and low sulfur bunker fuels. The potential costs of these mandates present a dilemma to a shipowner faced with a special survey.
For example, the owner of a 2003-built VLCC needs to decide whether to take the ship through the next two special surveys (15 and 17.5 years) with combined drydock costs of around $4-5 mill. The installation of a BWTS could cost an additional $2-3 mill.
And then there is the matter of IMO 2020 deadline. Does the owner retro-fit a scrubber on his/her 15-year old vessel for $3 mill? An owner may have to, if he/she wants to be able to effectively compete post 2020.
Non-ECO vessels built in the early 2000s typically have a higher fuel consumption than modern tankers and if they need to burn expensive MGO starting in 2020, they may struggle to compete.
A simple calculation indicates that a 15-year old VLCC would need to earn at least $16-17,000 per day to break even. While that is entirely possible, the current freight market is about of half that rate.
Even if the owner has the cash to invest (banks may be reluctant to provide credit for this), he/she needs to be able to reserve a scrubber and schedule the installation to coincide with the upcoming drydocking.
Given the risks and uncertainties involved, one can also understand the owner who decides to scrap the ship instead, Poten & Partners concluded.

Thursday, July 26, 2018

Saudi Arabia WAR THREAT: Oil tankers BOMBED – Saudis BAN exports through Red Sea straits

In a move which is sure to inflame tensions still further in the region after the recent war of words between US President Donald Trump and Iranian opposite number Hassan Rouhani, Saudi Energy Minister Khalid al-Falih said the Houthi movement had attacked two Saudi Very Large Crude Carriers (VLCCs) in the Red Sea on Wednesday morning, one of which sustained minimal damage.

A statement issued by Mr al-Falih’s ministry said: ”Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe.” 

Yemen, where a Saudi-led coalition has been battling the Houthis in a three-year war, lies beside the southern mouth of the Red Sea, one of the most important trade routes in the world for oil tankers. The tankers pass near Yemen's shores while heading from the Middle East through the Suez Canal to Europe.

The Saudi coalition intervened in Yemen's civil war in 2015 to restore the internationally recognised government of exiled president Abd-Rabbu Mansour Had. Saudi Arabia accuses regional arch-foe Iran of supplying missiles to the Houthis, which both Tehran and the Houthis deny.
In a move which is sure to inflame tensions still further in the region after the recent war of words between US President Donald Trump and Iranian opposite number Hassan Rouhani, Saudi Energy Minister Khalid al-Falih said the Houthi movement had attacked two Saudi Very Large Crude Carriers (VLCCs) in the Red Sea on Wednesday morning, one of which sustained minimal damage.

A statement issued by Mr al-Falih’s ministry said: ”Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe.” 

Yemen, where a Saudi-led coalition has been battling the Houthis in a three-year war, lies beside the southern mouth of the Red Sea, one of the most important trade routes in the world for oil tankers. The tankers pass near Yemen's shores while heading from the Middle East through the Suez Canal to Europe.

The Saudi coalition intervened in Yemen's civil war in 2015 to restore the internationally recognised government of exiled president Abd-Rabbu Mansour Had. Saudi Arabia accuses regional arch-foe Iran of supplying missiles to the Houthis, which both Tehran and the Houthis deny.
The ministry statement said both tankers that were attacked were operated by Saudi shipping company Bahri, which had earlier said that one of its VLCCs had suffered minor damage in an incident in the Red Sea, without elaborating.

Mr al-Falih said: “The two million barrels capacity for each tanker were full of crude oil cargo at the time and were headed for export. One of the VLCCs sustained minimal damage.

"Fortunately, there were no injuries or oil spill that would have resulted in catastrophic environmental damage. Efforts are currently underway to move the damaged ship to the nearest Saudi port."
One of the coalition's main justifications for intervening in Yemen's war in 2015 was to protect shipping routes such as the Red Sea. It has said it foiled previous attacks there in April and May.
 The coalition said in a statement carried by Saudi state media on Wednesday that the Houthi movement had attacked one oil tanker west of Yemen's Hodeidah port, but did not name the vessel or describe how it was attacked.

It said: "Thankfully the attack failed due to immediate intervention of the Coalition's fleet.”

No details of what this intervention entailed were provided.

The Houthis' Al Masirah TV had said on Twitter that they had targeted a warship named the Dammam off the western coast of Yemen in what the group later said was a missile attack.

In a separate statement carried on the Houthi-run SABA news agency, the group said it had also targeted a coalition frigate off the coast of al-Durayhmi in southern Hodeidah.

The Houthis, who have also launched missile attacks on Saudi cities, including the capital Riyadh, have threatened to block the strait of Bab al-Mandeb several times to force the coalition to stop its air strikes.

On Thursday, Houthi leader Mohammed Ali al-Houthi said the group's navy had the capacity to reach the high seas and Saudi ports.

He tweeted: ”We were taking into consideration to keep the navigation through Bab al-Mandeb safe, and to not provide the aggression forces an excuse that the waterway is under threat.”
The coalition has carried out a campaign of thousands of air strikes and restricted imports into Yemen, worsening what the United Nations says is potentially the world's worst humanitarian crisis.

Wednesday, July 25, 2018

Aliko Dangote, Africa’s richest man, on his ‘crazy’ $12bn project

Aliko Dangote

On his yacht in Lagos, he talks about his ambitious oil refinery — and his dream of buying Arsenal

Words: David Pilling

As a rule, I don’t get worked up over oil refineries. But the one gradually taking form on 2,500 hectares of swampland outside Lagos, Nigeria’s Mad Max commercial capital, is so big, so audacious and so potentially transformative that it is like Africa’s Moon landing and its Panama Canal — a Pyramids of Giza for the industrial age.

If Aliko Dangote, the billionaire businessman behind what even he calls his “crazy” $12bn project, can pull it off, he will go down as the continent’s John D Rockefeller, Andrew Carnegie and Andrew Mellon combined. And once he’s built it, he intends to treat himself to a small indulgence: he’ll buy Arsenal, his favourite football club.

“When we finish this project, for the first time in history Nigeria will be the largest exporter of petroleum products in Africa,” he tells me, summoning the drabbest of platitudes for a project of pharaonic ambition. I am sitting with Africa’s richest man discussing his life of superlatives over Thai food on his 108-foot yacht, moored in Lagos Lagoon. Yet the image he projects is more like a modestly successful encyclopedia salesman.
When I arrive at the dock, Dangote, a Muslim, is praying in his quarters. He soon comes out to greet me and turns out to be the most solicitous of hosts. “Feel at home,” he says. “We can hang that for you,” he adds, when I place my crumpled jacket on the yacht’s white leather couch. “Can we offer you something to drink?”

Dangote goes through the options arranged before us: “There’s vegetable spring rolls, chicken wings in a barbecue sauce, green Thai curry, some kind of seafood salad, noodles,” he says. “You are my guest, so what do you want? You want rice? Plain jasmine or with egg?”

I plump for the jasmine.

“You don’t eat egg?” he asks.

You asked me to pick one, I protest.

“That looks like satay,” I say, pointing to one of the plates.

“It is satay, actually.”

He spoons me out several of the dishes — it’s always fun to be served by a billionaire — and we dig in. It’s tasty, and there’s a plate of green chilli sauce to liven up proceedings. Dangote crunches into a spring roll and ignores the gently buzzing phone on the table.

A few numbers on the refinery will help illuminate the scale of his “craziness”. When it is up and running — if it gets up and running — it will process 650,000 barrels of oil a day, a third of every drop Nigeria produces and approaching 1 per cent of planetary production. That will make it the biggest oil refinery of its type in the world. As a sort of side concern, it will pump out all the plastic Nigeria’s 190m people need (or imagine they need), plus 3m tonnes of fertiliser a year, more than all its farmers currently sprinkle on their fields.

To make things more interesting, Dangote is building the whole thing on a swamp. (It’s a tax-friendly swamp, at least.) That requires sinking 120,000 piles, on average 25 metres in length. No port in Nigeria is big enough to take delivery of the massive equipment, which includes a distillation tower the height of a 30-storey building, and no road is strong enough to bear its weight. Dangote has had to build both, including a jetty for which he has dredged the seabed for 65m cubic metres of sand.

There is not enough industrial gas in the whole country to weld everything together, so Dangote will build his own industrial gas plant. There aren’t enough trucks, so he’s producing those in a joint venture with a Chinese company. The plant will need 480 megawatts of power, about one-tenth of the total that electricity-starved Nigeria can muster. You guessed it. Dangote is building his own power plant too.

For years — and absurdly — Nigeria has exported all its oil as crude and then reimported refined petroleum, such as petrol and benzene. That has been a lucrative racket for the middlemen who scheme over import contracts and who concoct ways to scam a system distorted by subsidies. “I’m sure you know about this game,” Dangote says.

Because of its reputation for skulduggery, he says, he has shunned the oil trade. “It is very simple to destroy a name,” he adds, referring to a family business that stretches back to his great-grandfather on his mother’s side, Alhassan Dantata, a prodigiously wealthy merchant who imported kola nuts from Ghana and exported groundnuts from Nigeria. “But it’s very difficult to build it.”

He tries to fast at least once a week, he says, looking guiltily at our feast. “It helps to clean your system. More peanut sauce?”

Many of today’s billionaires spin their fortunes from intangibles: the internet, the media, banking or hedge funds. Dangote has made his money from more prosaic things: salt, sugar, flour and, above all, cement. An awful lot of cement.

He was born in Kano, an ancient trading town in northern Nigeria, where he was brought up by his grandparents after his father died when Dangote was eight. After studying business at Al-Azhar University in Cairo, he moved to Lagos to strike out on his own. He too became a trader, but unlike the other businessmen whose fortunes were built on import licences available to the friends of politicians, Dangote had a hankering to make things.
Now 61, building his refinery is the culmination of that ambition. It will produce every litre of refined petroleum Nigeria needs, which could end the import business at a stroke, saving the country billions of dollars in foreign exchange. Won’t he make enemies of those he is depriving of easy money? “You can’t just come and remove food from their table and think they’re just going to watch you doing it,” he says. “They will try all sorts of tricks. This is a very, very tough society. Only the toughest of the tough survive here.”

Most Nigerians assume that Dangote is tougher than the next guy. While to many he is a hero who builds factories, employs thousands and reinvests his money at home, to others he is a villain: a ruthless monopolist who squeezes favours from the government of the day and crushes competition like limestone in a cement mixer. Some accuse him of avoiding taxes by invoking an investment incentive known as “pioneer status”. Others say he is more of a rentier than an entrepreneur, gouging the country with high prices and raking in ludicrous profits. “People throw a lot of mud at you and you have to see how you can clean it up,” he says of his detractors.

In person, he is charm itself, a soft-spoken man with a pleasantly round face, close-cropped hair and a greying moustache so delicately trimmed that it is almost not there. He projects integrity and humility, even piety. I’ve met mere millionaires with more swagger than him. Yet Dangote is a billionaire 14 times over and the 100th richest person in the world, according to Forbes.

He is a networker extraordinaire. To watch him work a room is to witness a kind of genius. He irradiates a Dickensian bonhomie as he glides from table to table, picking up goodwill — and intelligence — with each pressing of the flesh. If there are competing obligations — the wedding reception of the daughter of a Big Man, a dinner for the vice-president, a foreign investors’ post-conference gala — he manages to be at all three events at once, an apparition moving unhurriedly through the room as though he has all the time in the world. Like Bill Clinton, he remembers your name; like Al Capone, he’s got your number.

Even Dangote’s yacht — named Mariya, after his mother — manages to be understated, if such a thing is possible in a 108-foot vessel with a price tag, according to Lagos’s gossipy tabloids, of $43m. It was styled after a boat owned by fellow Nigerian billionaire, Femi Otedola, though intriguingly Dangote had his built a few feet shorter.

He makes no secret of how he got his big break, one that transformed him from a wealthy man — and by all accounts a bit of a dilettante — into a business colossus whose interests straddle the continent. It happened one day not long after the election in 1999 of Olusegun Obasanjo, the former military leader who had embraced the country’s lurch to democracy by running for the presidency. Dangote contributed both to that campaign and to his subsequent re-election in 2003.

“Obasanjo called me very early in the morning and said, ‘Can we meet today?’ ” says Dangote, recalling the presidential summons. He wanted to know why Nigeria couldn’t produce cement, instead importing it by the boatload. Dangote told him it was more profitable to trade than to produce. Only if imports were restricted would it be worthwhile. Obasanjo agreed. Dangote has never looked back.

Now Africa’s undisputed King of Cement, he produces in 14 countries. I hear that the business makes 60 per cent margins, I say. He waves the number away. “We have a margin of 47 per cent,” he says, as if that were a mere bagatelle. No one else can compete on efficiency, he says.

Critics say Nigeria pays more for cement than it ought to, slowing investment in construction and housing. When I put that to him, he immediately reaches for his phone, checking out today’s prices in Ghana, Benin and Ivory Coast. His own price is competitive, he says, adding that people often forget the high transport costs of importation.

Muhammadu Buhari, the current president, despairs of a manufacturing base that has shrivelled as a consequence of oil addiction, bemoaning that Nigeria even imports toothpicks.

“What Nigeria needs is to produce locally what we can produce locally,” Dangote says, nibbling at a skewered satay, and defending the thinking that has made him rich. “Nigeria still imports vegetable oil, which makes no sense. Nigeria still imports 4.9m tonnes of wheat, which does not make sense. Nigeria still imports 97 or 98 per cent of the milk that we consume.” Of the latter (astonishing, considering the country’s roughly 20m cows), he says, “The government needs to bring out a draconian policy to stop people importing milk, just like they did with cement.”

His phone is still vibrating. This time he takes it. He’s flying to India the following morning on his private jet and is making final arrangements. While he’s talking, I take a second helping of the seafood salad, a ceviche-like dish of calamari and succulent prawns marinated in a wincing sauce.

“It has been very, very, very hectic,” he says of his recent schedule. Only that morning, his doctor warned him to slow down and get more sleep. He reckons he rarely gets five hours a night. “The heart, it keeps pushing and pushing and pushing, but there must be a limit.”
‘I love Arsenal and I will definitely go for it,’ he says matter-of-factly, as though discussing the latest model of iPhone. He reckons the club is worth about $2bn
Often he’s firefighting. Problems erupt in one country or another and he is constantly criss-crossing the continent by jet. In Tanzania, where he’s built a $650m cement plant, he’s battled with the president over a threat to seize assets. Not long after I met Dangote, his country manager in Ethiopia was murdered.

When he’s not dealing with crises, he’s fending off friends and relatives, who are often seeking help of a pecuniary nature. “People call me in the middle of the night to tell me about their problems,” he smiles wryly.

Tony Blair, the former British prime minister and a friend of Dangote’s, told him he needed to screen his calls. “Tony said he only makes three phone calls a day,” Dangote says incredulously, helping himself to noodles. Each day scores of emails come rat-tat-tatting in. “You try to be polite and reply but they come back to you with a longer email, not minding that here is a very, very busy person,” he says mournfully. He reckons that he takes more than 100 calls a day. “ ‘Look Aliko’,” he says Blair told him, “ ‘the world is not going to fall apart if you don’t answer your phone.’ ”

Dangote’s schedule is also inhibiting romance. Twice divorced and with three grown-up daughters, he’s on the lookout for a new bride. “I’m not getting younger. Sixty years is no joke,” he says, “but it doesn’t make sense to go out and get somebody if you don’t have the time. Right now, things are really, really very busy, because we have the refinery, we have the petrochemicals, we have the fertiliser, we have the gas pipeline.” With sweet talk like that, I think to myself, it can’t be long before he wins some lucky woman’s heart. “I need to calm down a bit.”

His ambitions are changing. He is talking about pulling back from the business, concentrating on strategy and letting others run things day-to-day. “I’m trying to step back from some of the boards.” He will float the cement business in London, perhaps by the end of this year, and has already appointed independent directors — including Blair’s wife Cherie — to help satisfy London’s pesky governance requirements.

He remains Nigeria’s strongest advocate, though he consistently denies political ambition. If he ran for president, you wouldn’t bet against him. “Nigeria has always had a lack of visionary leadership,” is the closest he’ll come to declaring political intent. “There’s no country in Africa that has the energy of here. Nowhere, I’m telling you.”

He is less coy about another ambition: his designs on Arsenal, a Premier League football team he has long supported. “I love Arsenal and I will definitely go for it,” he says matter-of-factly, as though discussing the latest model of iPhone. He reckons it’s worth about $2bn. Long frustrated with the club’s decline under Arsène Wenger, the recently replaced manager, he says that as owner, he would involve himself in rebuilding the team — “chipping in my own advice”, as he puts it. “When I buy it, I have to bring it up to the expectations of our supporters.”

But first he has a refinery to build. “When you visit, you’ll see what a headache I am talking about,” he says of a project into which he has sunk more than $6bn of his own money. “Once I have finished with that headache, I will take on football.”

Aliko Dangote mobilises $4.5 billion to build world's largest oil refinery

Aliko Dangote has mobilised more than $4.5 billion in debt financing, adding that he needs up to $14 billion for his Nigerian oil refinery project and aims to start production in early 2020.

Africa’s richest man, who built his fortune in cement, is building the world’s largest single oil refinery with capacity of 650,000 barrels per day (bpd) to help to reduce Nigeria’s dependence on imported petroleum.

Despite being a crude oil exporter, Nigeria imports the bulk of its petroleum because of a lack of domestic refining capacity.

We will end up spending between $12 billion to $14 billion. The funding is going to come through equity, commercial bank loans, export credit agencies and developmental banks.

Dangote’s partners

Lenders would commit about $3.15 billion, with the World Bank’s private sector arm providing $150 million, Dangote said, adding that he was investing more than 60 percent from his own cash flow.
Dangote Group has said that Standard Chartered Bank was arranging funds for the project.
“We will end up spending between $12 billion to $14 billion. The funding is going to come through equity, commercial bank loans, export credit agencies and developmental banks,” Dangote said in an interview in Lagos on Tuesday.

“Hopefully, we will finish mechanical (construction) by next year and products will start coming out in the first quarter of 2020.”

Nigeria’s central bank would provide guarantees for about 575 billion naira in local currency for 10 years, with African Development Bank providing a $300 million loan. Trade banks from China, India and some European countries are also in the mix, Dangote said.

The planned refinery and petrochemical complex is expected to account for half of Dangote’s sprawling assets when it is finished next year.

Last week Dangote signed a loan of $650 millionwith the African Export-Import Bank (Afreximbank) for the project.

Dangote said he was looking to acquire more oilfields as his focus shift towards the oil sector to feed the refinery.

Tuesday, July 24, 2018

The Real Threat to America: Iran May Close the Strait of Hormuz

PACIFIC OCEAN (July 17, 2018) Aviation Boatswain's Mate (Handling) 2nd Class James Spencer signals the pilot of an F-35B Lightning II aircraft

Edward Chang
Security, Middle East

The risk of miscalculation is now significantly higher.

The Real Threat to America: Iran May Close the Strait of Hormuz 
President of Iran Hassan Rouhani threatened to close the Strait of Hormuz in response to potential sanctions that could be levied upon Iranian oil exports, threats which were echoed by the Islamic Revolutionary Guard Corps (IRGC). President Donald Trump has given countries until November 4, 2018, to stop importing petroleum from Iran. This wide-scale ban is part of a new campaign of confrontation and pressure against the Islamic Republic. This demand comes on the heels of the U.S. departure from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, which was signed in 2015.

During negotiations, the JCPOA was marketed as the only option for curtailing Iran’s nuclear program short of war. Supporters of the deal routinely cited an increased risk of war in their arguments against exiting the deal and Rouhani’s statement, on the surface, appears to confirm such concerns. But how seriously should these threats be taken?

We’ve Been Here Before

Iran threatening to close the Strait of Hormuz is nothing new. In fact, as recently as 2012, the Obama administration had its own confrontation with Iran over the latter’s nuclear program. Iran threatened to close the Strait and carried out military exercises in the area, drawing a major United States, British, and French deployment in response. But a year later, both sides resorted to negotiations that led to the JCPOA.

In 2008, citing fears of a U.S. or Israeli attack, the commander of the IRGC, Mohammad Ali Jafari, threatened to close the Strait of Hormuz in retaliation. During the 1980–88 Iran-Iraq War, both sides targeted one another’s shipping as part of a total war effort, raising fears that Iran might attempt to make the Strait of Hormuz unpassable. Iran used mines as part of its strategy, eliciting an operation to safeguard Kuwaiti shipping, codenamed Operation Earnest Will. Beginning in summer 1987, it lasted over a year-and-a-half and involved increasingly direct combat between the United States and Iran, culminating in Operation Praying Mantis in spring 1988. In the one-day air/naval battle, the United States scored a decisive victory, with Iran losing several warships during the exchange, while inflicting no losses in return.

Apart from the events that took place from 1987–88, none of these incidents resulted in open warfare. This is nothing short of remarkable, given the unrelenting level of hostility exhibited on both sides since the November 4, 1979, seizure of the U.S. embassy in Tehran. While the lack of actual fighting can be attributed to restraint and professional crisis management skills on the part of the United States, it can also be attributed to the fact that Iranian behavior and rhetoric regarding the Strait primarily serves as a means of crisis-management (albeit a dangerous one) and a political purpose.

Threatening Closure Is More Useful than Executing One

Closing the Strait of Hormuz has a regressive impact on Iran’s interests. As John Allen Gay and Geoffrey Kemp explain in War With Iran: Political, Military, and Economic Consequences:

Eighty-five percent of Iran’s imports come through the strait, and the oil exports so crucial to the Iranian government’s solvency mostly flow out of it. Iran would be cutting off its own lifeline if it closed the strait, and it would have to live on its already dwindling currency reserves. Iran would also be inviting attacks on its own oil facilities by vengeful neighbors, and it would isolate itself internationally.

So, in contemplating any Strait of Hormuz closure scenario, it should immediately be noted such a move by Iran amounts to one of desperation, employed only in a situation in which Tehran sees no other way out of its predicament. Therefore, a Strait closure is unlikely, the United States is well-aware of this, and the Iranian leadership probably realizes Washington can call its bluff any time. So why does Tehran continue to make such threats?

By threatening to close the vital waterway linking the oil-rich Persian Gulf with the world, through which approximately a third of the world’s petroleum is ferried, Iran stokes fears of war and economic crisis. This not only raises gas prices in anticipation of supply disruptions, but it also influences world opinion towards the direction of de-escalation, which would pressure the United States to back away from its own red lines. Given the number of countries that rely on Middle Eastern oil, including that of Iran, Tehran can craft a damning narrative that shows that the United States is generating a crisis to the world’s detriment.

These narratives work well at home, too. Like most autocracies, the Islamic regime regularly employs crises to establish political dominance and domestic order. The sights and sounds of Iranian naval forces challenging and harassing U.S. warships serves powerfully as propaganda, encouraging unity against the “Great Satan” that is America.

And while the United States has the capability to prevent a closure or re-open the Strait, the physical and political costs of such an undertaking are considerable. Assuming Iran would attempt a closure only when it feels it has no other recourse, it would then have little to lose from doing so, while the United States and the world would bear costs not easily recouped nor as readily borne in comparison.
What If Iran Were to Attempt a Strait Closure?

Iran’s closure of the Strait would not involve employing its naval forces to physically occupy the waterways in a conventional sense. Rather, it would make the Strait impassable utilizing an Anti-Access/Area-Denial strategy (A2/AD) strategy. For Iran, mines would form the centerpiece of this strategy to turn the choke point into a no-go zone. Afterwards, it can use land-based anti-ship missiles (ASMs) to prevent clearance operations or to directly target enemy warships and civilian shipping. Should Iranian leadership deem it necessary to deploy naval forces, the IRGC possesses a large fleet of small fast-attack craft. Though lightly armed, the craft can prove a menace to conventional warships, via the use of “swarming” tactics to overwhelm adversaries and employ “hit-and-run” attacks that are notoriously difficult to counter. On a higher level, Iran could target United States and allied military facilities in the region or even civilian population centers with ballistic missiles as a means of deterrence.

The ability of the United States and its allies to re-open the Strait of Hormuz comes down to preparation. Should advance warning be received of an impending closure attempt, the forces of Central Command (CENTCOM) would mobilize and naval forces, particularly one or more aircraft carrier strike groups would be rushed to region to force Iran to alter its calculations or to intervene before it makes much progress in making the waterways impassible. Should the United States and its allies be caught off-guard, then the costs of re-opening the Strait could be exorbitant.

For example, Gay and Kemp estimated the cost of a Hormuz mine-clearance operation to be $230.1 million. Even something as routine as maintaining two carrier strike groups (CSGs) on-station for a week was estimated to be $106 million. In the event of a more serious military confrontation, a 2017 RAND report calls for the deployment of, among other things, twenty-one Air Force fighter squadrons and four CSGs. It is more difficult to estimate human casualties, but these numbers make clear there are prohibitive up-front costs to a crisis in the Strait of Hormuz, whether a full-blown shooting war erupts or not.

However, for reasons outlined earlier, the likelihood of a surprise closure is remarkably low. The United States and its allies are well-aware of such a possibility and have been, for decades, well-prepared for the scenario. The military superiority of the United States and its allies all but ensures an overwhelming defeat for the Ayatollah’s warriors. Most importantly, a surprise closure of the Strait acts to Iran’s detriment, unless the strategic environment is such that Tehran feels its back is against the wall and has little to lose from such desperation. Threatening closure is more useful than attempting one, thus, absent exigent circumstances, Iran’s leadership will always telegraph its intentions, if only to avoid a situation where they must choose between backing down and losing face or following through and hazard overwhelming defeat.

Though risk of miscalculation remains, Iran has considerably dialed back on its hostile behavior in the Strait, while increasing its aggressive activities elsewhere. But if Tehran wants its threats to at least be taken seriously, it may need to again resort to maritime provocations against commercial shipping and the U.S. military. Iran’s de-emphasizing of the Gulf in its strategy does not appear to be something that will last much longer.

The Israeli Wild-Card

Some observers are predicting a cataclysmic war between the Jewish state and Hezbollah in the near future. Given Hezbollah serves as Iran’s most prominent proxy, there are concerns such a conflict will draw Tehran in as well, risking a major regional conflagration. Israel has, in fact, already clashed numerous times with Iran-backed militias in Syria in recent weeks and months, raising the likelihood of direct warfare between Jerusalem and Tehran.

Although Washington does not possess a mutual-defense treaty with Jerusalem, the former would still support the latter’s war effort through the provision of armaments, logistics, intelligence support, among other products. Furthermore, the United States currently has troops deployed in Syria, Iraq, Jordan, and elsewhere throughout the region, along with the ongoing air war against the Islamic State of Iraq and the Levant (ISIL). In the event of a war between Israel and Hezbollah, potentially including Iran, it would take incredible diplomatic and military maneuvering to keep the United States directly out of the conflict.

The true course of any conflict is difficult to predict, but Washington should consider the possibility Iran may attempt to distract American support for Israel by threatening to close the Strait of Hormuz. By creating it crisis on the opposite end of the Middle East, Iran is not so much banking on forcing the United States to reduce support for Israel, but to overstretch its commitments, and create political and strategic costs the American people may not be willing to bear, given the generally controversial nature of the U.S.-Israeli relationship. Once more, the importance of narratives emerges—threatening Strait closure mounts pressure on the White House to find a diplomatic solution to the conflict, due to the dread and uncertainty portending a U.S.-Iran clash would conjure.

Once again, however, blockading Hormuz proves an ineffective move if the United States is willing to counter Iran’s provocations. This means Iran is more likely to respond with low-intensity, deniable warfare by utilizing cyberwarfare its deep roster of militias and terrorist groups. Be it Lebanon’s Hezbollah, Gaza’s Hamas, or Iraq’s Popular Mobilization Forces, the Ayatollah is likely to call upon these players long before seriously considering closing the Strait of Hormuz. Hezbollah, in particular, is among the most well-connected of terrorist groups in the world, possessing links with Central and South American drug cartels. A worst-case scenario would involve Hezbollah exploiting these connections to carry out terrorism on American soil. At the very least, it can be expected that Iranian-backed militias like the PMU can be used to attack U.S. and coalition forces in Iraq and Syria as the anti-ISIL campaign continues. This would force the United States/coalition to contemplate escalating their involvement in the multiple civil wars in the region, or, to their obvious detriment, refrain from retaliation.


Barring further developments, this latest threat from Tehran to close the Strait of Hormuz will likely pass without incident. It will, however, create the potential for close encounters between U.S. and Iranian naval forces in the region, leaving open a window of heightened risk of miscalculation. Furthermore, the likelihood of a war between Hezbollah and possibly Iran continues to grow by the day. If or when that war happens, the United States and the coalition will find it difficult to stay out of the line of fire.

Edward Chang is a freelance defense, military, and foreign-policy writer. His writing has appeared in the National Interest and War Is Boring.

Monday, July 23, 2018


 President Trump issued a strongly worded all-caps late-night tweet after Iranian President Hassan Rouhani (right) said that war with Iran would be "the mother of all wars and peace with Iran is the mother of all peace."

President Trump threatened Iran in a late-night tweet on Sunday, responding angrily after Iranian President Hassan Rouhani criticized Trump and warned the American president not to "play with the lion's tail" and that "war with Iran is the mother of all wars."


At a gathering of Iranian diplomats in Tehran on Sunday, according to Iran's state news agency, Rouhani said, "America should know that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars."

Iran can defend itself, Rouhani added, hinting that his country could also affect oil shipping through the Strait of Hormuz in the Persian Gulf if it were to come under attack.

As for how Trump's response has been received, Iran's state news agency said the tweet was typical of the American president's "bullying words."

NPR's Peter Kenyon reports some people have pointed out that "you can't really do all-caps in Persian, that doesn't quite translate. But no mistaking the threatening nature of the message."

Also on Sunday, Secretary of State Mike Pompeo launched a blistering attack on Iran in remarks at the Ronald Reagan Presidential Library in California.

Pompeo accused Iran of corruption and mismanagement at the highest levels and said the country had backed terrorist attacks in Europe even as it tried to reassure EU members that Iran will follow restrictions in their nuclear agreement.

In pointed remarks, Pompeo said Iran's supreme leader, Ayatollah Ali Khamenei, controls a hedge fund valued at $95 billion — a fund called the Setad (and on which Reuters did a special report in 2013).
"That wealth is untaxed, it is ill-gotten, and it is used as a 'slush fund' for the IRGC [Islamic Revolutionary Guard Corps]," Pompeo said. "The level of corruption and wealth among Iranian leaders shows that Iran is run by something that resembles the mafia more than a government."

Pompeo also tweeted a succession of messages in Farsi, trying to bring his message directly to any Iranians able to skirt their country's censors. In them, he said Iran's 1979 revolution had borne "bitter fruit."

Pompeo said, "After 40 years of tyranny, the proud Iranian people are not staying silent about their government's abuses. We will not stay silent either."

In Tehran, Rouhani questioned whether the U.S. can embrace Iran's people while fighting its government, saying, "There were no times in the past like today that we are witnessing the White House acting against the international law, Islamic World and Palestinian people."

Trump's tweet prompted questions about what the president meant by "consequences" for Iran, aside from the economic sanctions the U.S. is already set to reimpose after leaving the Iran nuclear deal.

On Monday morning, the White House released this statement from national security adviser John Bolton: "I spoke to the president over the last several days, and President Trump told me that if Iran does anything at all to the negative, they will pay a price like few countries have ever paid before."

The timing of Trump's heated remarks also raised the question of why he decided to issue his tweet late Sunday — after a week of negative attention for his meeting with Russian President Vladimir Putin last Monday, and the revelation that his former attorney Michael Cohen recorded him in 2016 discussing payments to a woman who claimed she had an affair with Trump.

"Donald Trump likes to direct the media narrative, to control it," NPR's Mara Liasson said on Morning Edition. "And he's gotten us all talking about Iran this morning, instead of talking about Putin, or the investigation into Russian interference."

Mara noted that Trump also directed violent language toward North Korea — before meeting with Kim Jong Un in Singapore. "Sometimes he likes to create a crisis, and then become the hero of his own story and declare the crisis over," Liasson said.

In the case of North Korea, she pointed out, the crisis was declared over despite any nuclear weapons being dismantled.

Friday, July 20, 2018

Do changes in trade flows impact the tanker market?


Poten & Partner’s weekly opinion piece recently looked at nearly five years of crude oil trade data (2014 –2018) to see if any interesting trends or developments could be seen. 
Are certain segments growing faster than others? How about shifts in export or import regions. Was anything noticed that was not expected?
First, the overall crude oil and dirty product trade for 2014-2018 was examined. To make the earlier years comparable with 2018, Poten looked at only the first six months of the year.
The data showed that the dirty tanker trade steadily grew during 2014-2017, increasing almost 5% in the first six months of 2015 and still growing 2.2% and 3.3% in 2016 and 2017, respectively.
However, in 2018 to date, the total dirty tanker trade (measured in tonnes) was down  1.3% compared to the same period one year ago (tonne/miles:-1.6%).
In Asia, modest increases in China and India could not compensate for declines in Japan and Asean countries, so overall tonne/mile demand from Asia was down 1%.
The biggest decline in import demand, however, came from the US (-15%). On the other hand, US exports were one of the few bright spots this year to date, with tonne/mile demand more than double that of the same period last year. The long-haul trade to China was responsible for almost 60% of that increase.
A review of the largest trade routes confirmed the changes in crude flows. The largest VLCC route was from the Arabian Gulf to the China Sea (China, Taiwan, South Korea) and this has not changed since 2014. This route, which is more than twice the size of the next route (AG –Japan), represents some 30% of the total VLCC trade.
However, the AG –US Gulf trade, which ranked No 4 in 2014 declined both in absolute and relative terms. Its volume fell by 33% and it now only ranked sixth.
In contrast, the US Gulf –China Sea VLCC trade currently ranks nineth. This trade did not exist prior to 2017. This increase in USG VLCC exports coincided with a decline in Venezuelan exports.
Another VLCC trade that has been in decline recently (and quite volatile overall) is that from AG to Europe. After a 55% increase from 2016 to 2017, this trade has fallen by 42% so far this year.
Moving onto the Suezmax segment, this trade has developed differently from VLCCs.
Suezmax employment has increased steadily since 2014, with a healthy 5% increase thus far this year.
A lot of Suezmaxes are employed in shuttle trades offshore Brazil (No 1 in the ranking) and in moving Alaskan crude to the US West Coast (No 3), but these trades are not growing and generate relatively little tonne/mile demand, due to the short distances involved.
The same applies to the second largest trade - AG to India.
A growing Suezmax trade is the AG –Southern Europe, but this is to a large extent driven by rising exports from Iran, which could be in jeopardy in the second half of this year, due to US sanctions.
West Africa exports have been relatively stable in recent years after significant volatility in 2014 –2016.
Thus far this year, Suezmax trades from the AG, West Africa, the Black Sea, the US Gulf and from the UK/Cont were growing, while trades originating in the Far East, the Eastern Med and Venezuela were struggling.
In the Aframax segment, the intra-Asean Far East (including Indonesia, Thailand, Malaysia, Singapore, etc) has overtaken the Caribbean market as the largest Aframax trading area.
Another Asian Aframax trade that is growing in importance is the exports out of Kozmino to China, South Korea and Taiwan.
Thus far in 2018, this is the third largest Aframax route (in tonnes), recently overtaking certain trades in the North Sea and the Mediterranean.
Overall, Aframax employment is down thus far this year versus 2017 in terms of number of voyages, and barrels moved, but tonne/miles are slightly up, as average distances increased.
In total, crude oil tanker demand has been relatively flat and rates are down as a result of increases in fleet size. However, there are a lot of developments hidden under the surface that belie the relative stability of aggregate tanker demand, Poten concluded. 

Thursday, July 19, 2018

US Revokes Citgo CEO’s Visa

 CEO of Citgo Petroleum Corp. Asdrubal Chavez


The president and CEO of Citgo Petroleum Corp. Asdrubal Chavez, had his US visa revoked. Citgo is the US subsidiary of Venezuela’s state-run PDVSA.

Chavez is the cousin of Venezuela’s late president Hugo Chavez.

US State Department spokesman Noel Clay said the US has broad authority to revoke visas, but does not discuss individual cases because they are confidential under the law.

In a statement on the issue, a Citgo spokeswoman only said that the “day-to-day operations of CITGO remain uninterrupted and senior leadership remains unchanged.”

Wednesday, July 18, 2018

EIA: Seven Major US Shale Regions To Hit New Production Records

File:United States Shale gas plays, May 2011.pdf

Oil production in the seven most prolific US shale regions will hit new highs next month, according to the Energy Information Administration’s monthly Drilling Productivity Report released on Monday afternoon.

Production in the seven regions is expected to increase by 143,000 bpd in August over July’s 7.327 million bpd, according to the EIA.

The news came not even 24 hours after Wood Mackenzie called peak oil demand in 2036 as electric vehicle sales grow , sending oil prices sharply downward on the news.

At 4:15pm EDT, the WTI benchmark was trading down a staggering 4.10% (-$2.91) at $68.10. Brent crude was trading down even more, at 4.50% (-$3.39) at $71.94.

Of the seven more prolific US regions for oil, the Permian is expected to see the biggest increase, at 73,000 bpd, to reach 3.406 million bpd. If this level of production is realized in August, it would represent about a 400,000 bpd climb since January in the Permian alone.
Increases in unconventional oil in the Eagle Ford is thought to come in a distant second, according to the industry body, at an 35,000-bpd increase to reach 1.436 million bpd.

The EIA’s Drilling Productivity Report also tracks drilled but uncompleted wells, which are seen increasing in number for August by 193 across the seven major regions—164 of which are in the Permian. This figure represents one of the largest monthly increases in recent months. The DUC count is of particular concern in the Permian, which is facing takeaway constraints. Some analysts are concerned, according to S&P Global Platts, that if oil and gas cannot be moved out of the Permian due to these constraints in the Permian, the number of wells in the Permian will need to be “banked” until such capacity is brought online.

By Julianne Geiger for Oilprice.com