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Danger Looms as Nigeria Delays Enforcement of Dirty Fuels Import Ban

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  • Danger Looms as Nigeria Delays Enforcement of Dirty Fuels Import Ban

More than one and a half years after the Federal Government banned the importation of dirty fuels into the country, industry players and other stakeholders are still awaiting the enforcement of the ban.

Our correspondent gathered that a report had been submitted to the Federal Government by a committee that included the Department of Petroleum Resources, Standards Organisation of Nigeria, and the Ministry of Environment regarding the plan to shift to low-sulphur fuels.

Most of the petroleum products consumed in the country are imported with sulphur content as high as 1,000 parts per million for petrol and 3,000ppm for diesel.

On December 1, 2016 in Abuja, Nigeria, Benin, Togo, Ghana and Cote d’Ivoire agreed to ban the importation of Europe’s dirty fuels, limiting sulphur in fuels from 3,000 parts per million to 50 ppm.

But the enforcement of the ban failed to come into effect on July 1, 2017 in Nigeria as announced in December 2016 by the then Minister of Environment, Mrs Amina Mohammed.

A petroleum expert, Mr Bala Zakka, who expressed concern on the continued importation of dirty fuels, said, “One of the problems with Nigeria is lack of implementation of policies.”

“How on earth can we be exporting sweet crude that is almost sulphur-free or with a small percentage of sulphur and then be importing refined products with high sulphur content? This tells you that something is definitely wrong with Nigeria.” He spoke in a telephone interview with our correspondent.

The Chief Operating Officer of Refineries and Petrochemicals, NNPC, Mr Anibor Kragha, told the African Refiners Association in March this year that the country would lower the top level of sulphur in diesel to 50 parts per million from 3,000ppm, by July 1, 2018.

Kragha was quoted by Reuters as saying in a presentation during the ARA Week in Cape Town, South Africa, that while Nigeria was committed to cleaner fuel standards, significant costs complicated efforts to meet the deadline.

He also said that the ministries of Environment, Health, Petroleum Resources and Industry and Trade were working together to finalise rules that would be distributed to importers at some point in the second quarter of this year.

According to him, petrol sulphur level cuts will start in October, moving to 300ppm from 1,000ppm, with a target of 150ppm by October 1, 2019.

Kragha said the first shift to cleaner petrol would cost $11.7m per month, and the second, $15.7m per month, adding that the diesel reduction would cost $2.8m per month.

The National Operations Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, said, “If we continue to import petroleum products with high sulphur because they are cheaper to the detriment of human lives, does it make sense? So, if it costs more and the lives of people are protected and the environment is safe, it is better.”

He told our correspondent that the increase in the price of the products as a result of the shift to low sulphur content would be marginal.

“The DPR, Federal Ministry of Environment, NNPC, SON, National Automotive Design and Development Council, PPPRA, and Major Oil Marketers Association of Nigeria were part of the committee that worked and reviewed the sulphur level on diesel, petrol and kerosene. They have concluded their report and sent it to the government for implementation,” an official of the Ministry of Petroleum Resources told our correspondent on condition of anonymity.

The United Nations Environment Programme said in December 2016 that the move to ban dirty fuel imports by Nigeria and others would dramatically reduce vehicle emissions and help more than 250 million people to breathe safer and cleaner air.

It noted that a report by Public Eye in September 2016 exposed how European trading companies were exploiting the weak regulatory standards in West African countries, allowing for the exportation of fuels with sulphur levels up to 300 times higher than was permitted in Europe.

In a statement dated September 8, 2017 on its website, the Federal Ministry of Environment said in line with the government’s commitment to reduce emissions to protect human health, it had in collaboration with Ministry of Industry, Trade and Investment/SON and in due consultation with relevant stakeholders successfully reviewed standards of sulphur content in diesel and petro-products.

It said, “The specified level of sulphur that would henceforth be acceptable in petroleum fuels used in the country is as follows: From July 1, 2017, diesel should have maximum sulphur levels of 50 parts per million; petrol should have maximum sulphur levels of 150 ppm; and household kerosene should have maximum sulphur levels of 150 ppm.”

“Petroleum products that have high sulphur content levels produce high emission levels in automotive engines. Such vehicular emissions contain high level of toxic pollutants such as benzenes and particulates that have negative impact on human health and on the environment. Modern vehicles require fuels that meet high quality standards for a more efficient operation of their engines.”

Compared to other parts of the world, such as Europe and North America, fuel quality in many African countries, including Nigeria, remains very poor.

European standards for fuel quality include Euro IV (50ppm for petrol and diesel) and Euro V (10ppm for both).

UNEP, ARA and health campaigners have been pushing West African nations to ban fuels that are illegal in Europe and the United States for years due to what they say are significant health problems associated with sulphur emissions – particularly in dense urban areas such as Lagos.

The region is said to be one of the last on earth where it is legal to sell fuels with sulphur levels at and above 1,000ppm as East and North African nations and major Asian consumer countries such as China and India have already tightened rules.

ARA has developed the AFRI specifications as guidelines for the production of cleaner fuels including AFRI III (300ppm for petrol and 500ppm for diesel), AFRI IV (150ppm for petrol and 50ppm for diesel). Africa aims to produce fuels with the AFRI-4 specifications by 2020.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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Nigeria Awards $21M Contract to Meter 187 Crude Oil Flow Stations

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The Federal Executive Council (FEC) has approved a $21 million contract to meter 187 crude oil flow stations across Nigeria.

The decision was announced by the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, during a press briefing in Abuja.

Minister Lokpobiri highlighted that this initiative is part of the government’s broader strategy to reorganize the oil and gas sector, ensuring accurate accounting of the country’s crude oil production and exports.

The contract, awarded to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), aims to install metering systems at flow stations within the Niger Delta region.

“This project marks a major development that has never happened in this country. The metering of our 187 flow stations will provide proper accountability of our oil production and exportation,” Lokpobiri stated. The project is expected to be completed within 180 days.

In addition to the metering contract, the FEC also approved the deployment of advanced software to monitor the movement of Nigeria’s crude oil from the point of loading to its final destination.

This technology will allow real-time tracking of crude oil shipments, addressing long-standing issues of oil theft and misreporting.

Lokpobiri explained, “With this advanced cargo tracking technology, we will know from the point of loading in Nigeria up to the final destination. This step is crucial in ensuring Nigerians get maximum value for the crude oil produced.”

The metering and monitoring initiatives come at a time when Nigeria faces significant challenges in its oil production.

Domestic refineries have complained of insufficient crude supplies, and there have been persistent concerns about the transparency of actual crude oil volumes produced in the Niger Delta.

Nigeria’s current production stands at less than 1.3 million barrels per day, below the 1.5 million barrels daily quota approved by the Organisation of Petroleum Exporting Countries (OPEC).

The initiatives are part of the government’s efforts to ramp up crude oil production and increase revenue.

“Oil remains the fastest way to raise the funding needed to address our economic and social problems,” Lokpobiri noted.

The accurate tracking and metering of oil production are expected to bolster investor confidence and contribute to the country’s economic stability.

The minister also hinted at ongoing efforts to rekindle investor confidence in Nigeria’s oil sector, which has seen a decline in major investments over the past 12 years.

“Since the inception of this administration, we have been working hard to bring back the confidence of the investing community,” Lokpobiri declared.

In a related development, the Port Harcourt refinery is expected to come on stream soon, although Lokpobiri did not specify a date for its operational commencement.

The refinery’s activation is anticipated to further boost Nigeria’s oil processing capacity and reduce dependence on imported refined petroleum products.

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