- Flood of U.S. Oil to Asia Comforts Tanker Market Trashed by OPEC
OPEC all but trashed the tanker market with its output cuts. That the damage hasn’t been even worse is thanks in large part to a flood of U.S. crude exports, particularly to Asia.
China zoomed past Canada to become the biggest foreign destination for American crude in February, accounting for more than 8 million barrels of U.S. cargoes. Tanker tracking is indicating no let up in U.S. oil flooding to Asia in March, boosting shipments on what is one of the industry’s longest-distance trade routes.
Freight rates for oil collapsed this year after the Organization of Petroleum Exporting Countries and other nations reliant on crude sales announced production cuts in a bid to prop up prices. The curbs have driven Chinese and other Asian buyers to places like the U.S. and the North Sea to source crude like never before, adding the vital ingredient of distance to tanker demand.
“The U.S. exports have been a big saving grace,” said Jonathan Lee, chief executive officer of Tankers International LLC in London, operator of the world’s biggest pool of supertankers, known in the industry as very large crude carriers. “Is America becoming a swing producer of pricing and quantities? For us there could be an argument to say yes.”
Crude Tankers Heading to Asia
The U.S. exported 8.08 million barrels of U.S. light crude to China in February, nearly quadrupling its January flows, according to data released by the U.S. Census Bureau Tuesday. That helped boost total monthly U.S. exports to a record 31.2 million barrels.
Tanker tracking data show a continuation of the trend. Supertankers with the capacity to move 4 million barrels are en route to Chinese ports. A further 7 million barrels are being shipped to Singapore, a refueling point for vessels ultimately sailing to China. All the ships in question are sailing east, rather than around South America and across the Pacific Ocean. The data include deliveries on 1 million-barrel hauling vessels called Suezmaxes, which Lee says are also benefiting from the surging U.S. outflow.
Even so, the shipments from the U.S. and elsewhere in the Atlantic Basin only mean rates are less bad than would they would have been otherwise. OPEC, along with its non-member allies, pledged to cut about 330 million barrels from the global oil market in the first six months of this year. With about 40 percent of global crude output getting moved by sea, that would imply the removal of about 130 million barrels from the supertanker market. There’s also speculation that the cuts, initially planned to run for six months from January, may be extended through December.
“If you look at total crude exports, it’s down,” said Frode Moerkedal, an analyst at Clarksons Platou Securities, the investment banking unit of the world’s largest ship broker. “Overall the slowdown in volume growth has trumped the increase in trading distances.”
Even so, while benchmark tanker rates fell from around $70,000 a day in December to below $15,000 a day in March, they still cover basic costs. In the worst markets, owners are sometimes willing to contribute to fuel costs on certain trade routes. Expenses like crew, insurance and repairs amounted to $10,159 a day for an average VLCC in 2015, according to the most recent estimate from Moore Stephens, a consulting firm in industry expenses.
That rates aren’t worse is partly thanks to Asian refiners scouring the earth to replace supplies lost from OPEC’s core members in the Middle East. West African exporters — including Nigeria, which is exempt from the producer club’s cuts — are sending record amounts of oil to Asia this month, tanker tracking data show.
Those surging supplies from the Atlantic Basin have helped prevent earnings from falling much below a ship’s operating costs, said Andreas Wikborg, equity analyst at Arctic Securities. Central and South American producers have been adding support too, boosting output and sending more to Asia, he said. At the same time, the North Sea sent an additional nine million barrels of crude to Asia in the first three months of 2017 compared with 2016.
“Definitely the Atlantic Basin is helping keep rates at an ‘OK’ level compared to where they could have been,” Wikborg said. “An OPEC cut is bad news for tankers, but part of the lost volumes are to a degree being compensated for by increased distances. If the U.S. export ban hadn’t been lifted it would have put increased pressure on rates.”
Oil and Gas Companies in Nigeria
Nigeria is an oil reach nation with several oil and gas companies operating in Africa’s largest economy. However, only ten oil and gas companies are listed on the Nigerian Exchange Limited (NGX).
Before we discuss in detail each of the listed oil and gas companies in Nigeria. A short background on Africa’s largest economy will help throw more light on the significance of the oil and gas companies or the entire oil sector to the Nigerian economy.
Nigeria is a petrol-dollar economy, which means Africa’s most populous nation, sells crude oil and use its proceed to service the economy. In fact, the Nigerian Naira is backed by crude oil like Canadian Dollar and other commodity-dependent economies.
But because the Central Bank of Nigeria (CBN) pegged the Naira against its global counterparts, the local currency does not reflect succinctly the fluctuation in global oil prices like other crude oil-dependent currencies.
Since global oil prices rebounded with the gradual reopening of economies, the oil and gas companies in Nigeria have also rebounded from the 2020 record low of $15 per barrel. The oil and gas sector has gained 62.76 percent from the year to date, according to the NGX Oil and Gas Index.
The index gauge price movements in 10 listed oil and gas companies in Nigeria. However, there are several oil and gas companies in Nigeria not listed on the Nigerian Exchange Limited.
Oil and Gas Companies Listed on the Nigerian Exchange Limited (NGX)
|Company||Ticker||Sector||Date Listed||Date Incorporated|
|ARDOVA PLC [CG+]||ARDOVA||OIL AND GAS||–||November 12, 1964|
|CAPITAL OIL PLC [MRF]||CAPOIL||OIL AND GAS||–||August 29, 1985|
|CONOIL PLC||CONOIL||OIL AND GAS||–||June 30, 1970|
|ETERNA PLC.||ETERNA||OIL AND GAS||–||January 13, 1989|
|JAPAUL GOLD & VENTURES PLC||JAPAULGOLD||OIL AND GAS||August 10, 2005||June 29, 1994|
|MRS OIL NIGERIA PLC.||MRS||OIL AND GAS||–||August 12, 1969|
|OANDO PLC [MRF]||OANDO||OIL AND GAS||February 24, 1992||August 25, 1969|
|RAK UNITY PET. COMP. PLC. [MRF]||RAKUNITY||OIL AND GAS||–||December 20, 1982|
|SEPLAT ENERGY PLC [CG+]||SEPLAT||OIL AND GAS||–||June 17, 2009|
|TOTALENERGIES MARKETING NIGERIA PLC||TOTAL||OIL AND GAS||–||January 6, 1956|
Oil Prices Extend Gains on Friday After Saudis Dismiss Supply Concerns
Oil prices extended gains on Friday after Prince Abdulaziz bin Salman, Saudi Energy Minister dismissed calls for more crude oil supply on Thursday.
Brent crude oil, against which Nigerian oil is priced, rose to $84.92 per barrel at around 8:31 am Nigerian time. The U.S West Texas Intermediate crude oil also responded positively to the comment, rising to $81.56 per barrel on Friday.
“What we see in the oil market today is an incremental (price) increase of 29%, vis-à-vis 500% increases in (natural) gas prices, 300% increases in coal prices, 200% increases in NGLs (natural gas liquids) ….”
He further stated that the Organization of the Petroleum Exporting Countries and allies led by Russia, have done a “remarkable” job acting as “so-called regulator of the oil market,” he said.
“Gas markets, coal markets, other sources of energy need a regulator. This situation is telling us that people need to copy and paste what OPEC+ has done and what it has achieved.”
Prince Abdulaziz explained that OPEC plus will add 400,000 barrels per day in November and do the same in December and subsequent months. The increase will be gradual he said.
“We want to make sure that we reduce those excess capacities that we have developed as a result of COVID,” he said, adding that OPEC+ wanted to do it “in a gradual, phased-in approach”.
Lack of Investment in Clean Energy Compromising Fight Against Climate Change and Poverty
New research highlights a chronic lack of finance that will leave billions of people in Sub-Saharan Africa and Asia without electricity or clean cooking by 2030; Urgent action to accelerate investment in clean energy for developing countries is needed from global leaders assembling at COP26 to ensure a just energy transition.
This year’s Energizing Finance research series – developed by Sustainable Energy for All (SEforALL) in partnership with Climate Policy Initiative (CPI) and Dalberg Advisors – shows the world is falling perilously short of the investment required to achieve energy access for all by 2030 for the seventh consecutive year.
In fact, tracked finance for electricity in the 20 countries that make up 80 percent of the world’s population without electricity – the high-impact countries – declined by 27 percent in 2019, the year before the onset of the Covid-19 pandemic. The economic strain caused by Covid-19 is expected to have caused even further reductions in energy access investment in 2020 and 2021.
Energizing Finance: Understanding the Landscape 2021, one of two reports released under the series, finds committed finance for residential electricity access fell to USD 12.9 billion in 2019 (from USD 16.1 billion in 2018) in the 20 countries. This is less than one-third of the USD 41 billion estimated annual investment needed globally to attain universal electricity access from 2019 to 2030.
Meanwhile, there is an abysmal amount of finance for clean cooking. Despite polluting cooking fuels causing millions of premature deaths each year and being the second largest contributor to climate change after carbon dioxide, only USD 133.5 million in finance for clean cooking solutions was tracked in 2019. This is nowhere near the estimated USD 4.5 billion in annual investment required to achieve universal access to clean cooking (accounting only for clean cookstove costs).
These findings have been released just ahead of COP26 in Glasgow, where global leaders will focus on how to spark meaningful progress on fighting climate change. As part of this, they will need to consider how to reduce global emissions from the energy sector while also increasing energy access in developing countries to support their economic development.
“We are at a critical moment in the energy-climate conversation,” said Damilola Ogunbiyi, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All and Co-Chair of UN-Energy. “What is clear is that the path to net zero can only happen with a just and equitable energy transition that provides access to clean and affordable energy to the 759 million people who have no electricity access and 2.6 billion people who lack access to clean cooking solutions. This requires resources to mitigate climate change and create new opportunities to drive economic development and enable people everywhere to thrive. Energizing Finance provides an evidence base of current energy finance commitments and the finance countries require to meet SDG7 energy targets.”
In 2018, 50 percent of total electricity finance flowed to grid-connected fossil fuels in the high-impact countries compared to 25 percent in 2019. While this is a positive trend for the climate, tracked investment in off-grid and mini-grid technology also declined and represented only 0.9 percent of finance tracked to electricity.
Dr. Barbara Buchner, Global Managing Director at CPI, who partnered with SEforALL on Energizing Finance: Understanding the Landscape 2021, said: “Achieving both the Paris Agreement and universal energy access requires far greater investment in grid-connected renewables and off-grid and mini-grid solutions than what has been tracked in Energizing Finance. These solutions are essential to helping high-impact countries develop their economies without a reliance on fossil fuels.”
To better illuminate the challenges high-impact countries face, the second publication in the series, Energizing Finance: Taking the Pulse 2021, offers a detailed look at the estimated volume and type of finance needed by enterprises and customers to achieve universal energy access for both electricity and clean cooking by 2030 in Mozambique, Ghana and Vietnam. Importantly, it illustrates the energy affordability challenges people face in these countries and the need for financial support for consumers, such as subsidies.
The report finds that providing access to clean fuels and technologies, i.e. modern energy cooking solutions, in Ghana, Mozambique and Vietnam will cost a total of USD 37-48 billion by 2030; 70 percent of which will be for fuels (e.g., LPG, ethanol and electricity). A more achievable scenario would be for all three countries to deliver universal access to improved cookstoves at a total cost of USD 1.05 billion by 2030.
“Ghana, Mozambique and Vietnam each have unique challenges to achieving universal access to electricity and clean cooking,” said Aly-Khan Jamal, Partner at Dalberg Advisors, who partnered with SEforALL on Energizing Finance: Taking the Pulse 2021. “This research digs deep into these national contexts to identify solutions that can make Sustainable Development Goal 7 a reality.”
Providing results-based financing for energy project developers and exploring policies that facilitate demand-side subsidy support and reduce taxes on solar home systems are among several policy recommendations presented for Ghana, Mozambique and Vietnam.
Energizing Finance also advocates for increased innovation in financial instruments to reach the scale of finance needed for universal clean cooking access; for integration of electricity access, cooking access and climate change strategies; and for national governments, bilateral donors, philanthropies, and DFIs to all increase their efforts to mobilize commercial capital to Sub-Saharan African countries.
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