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Malabu: FG Slams Shell, Eni With $1.1bn Lawsuit in UK

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  • Malabu: FG Slams Shell, Eni With $1.1bn Lawsuit in UK

The Federal Government said it had filed a $1.1bn lawsuit against Royal Dutch Shell and Eni in a commercial court in London on Thursday in relation to a 2011 oilfield deal in Nigeria.

The two oil majors are embroiled in a long-running corruption case revolving around the purchase of Oil Prospecting Licence 245.

OPL 245, which is one of the biggest sources of untapped oil reserves on the African continent with reserves estimated at nine billion barrels, is also at the heart of an ongoing corruption trial in Milan, Italy, in which former and current Shell and Eni officials are on the bench.

Milan prosecutors alleged bribes totalling around $1.1bn were paid to win the licence to explore the field which, because of disputes, had never entered into production.

The new London case also related to payments made by the companies to get the OPL 245 oilfield licence in 2011, Reuters reported on Thursday.

“It is alleged that purchase monies purportedly paid to the Federal Republic of Nigeria were in fact immediately paid through a company controlled by Dan Etete, formerly the Nigerian Minister of Petroleum, and used for, among other things, bribes and kickbacks,” Nigeria said on Thursday.

“Accordingly, it is alleged that Shell and Eni engaged in bribery and unlawful conspiracy to harm the Federal Republic of Nigeria and that they dishonestly assisted corrupt Nigerian government officials.”

The Nigerian government also included Nigeria-based Malabu Oil & Gas in the lawsuit, and a company called Energy Venture Partners Ltd., according to Bloomberg.

Malabu was allegedly controlled by Etete, who took possession of the $1.1bn payment and used it for bribes and kickbacks, according to the lawsuit.

Antonio Secci, a lawyer for Etete, was quoted as saying that the London suit “surprises” because the Nigerian government is already seeking damages in Milan.

“This situation cannot be represented again in London because it is repetitive,” he said.

Shell said “the 2011 settlement of long-standing legal disputes related to OPL 245 was a fully legal transaction with Eni and the Federal Government of Nigeria, represented by the most senior officials of the relevant ministries.”

Eni was quoted as saying in an emailed statement that it rejected “any allegation of impropriety or irregularity in connection with this transaction.”

“Eni (…) signed a commercial agreement in 2011 for a new licence for OPL 245 with the Federal Government of Nigeria and the Nigerian National Petroleum Corporation and the consideration for the licence was paid directly to the Nigerian government,” it said.

Nigeria has already filed a London case against a US bank, JPMorgan, for its role in transferring over $800m of government funds to Etete, who has been convicted of money laundering.

In another separate trial, a Milan court in September found a middleman guilty of corruption after prosecutors alleged he had received a mandate from Etete, who had denied any wrongdoing, to find a buyer for OPL 245, collecting $114m for his services.

Last month, a global anti-corruption and accountability watchdog group, Global Witness, calculated that the OPL 245 deal deprived Nigeria of double its annual education and healthcare budget.

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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Crude Oil

Brent Crude Falls to $84.12, WTI Rises to $80.19

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In a cautious market, oil prices showed mixed movements in Asian trade on Tuesday.

Global benchmark Brent crude oil, against which Nigerian oil is priced, experienced a slight decline of 13 cents, or 0.15%, to settle at $84.12 per barrel.

Meanwhile, U.S. West Texas Intermediate (WTI) crude oil saw a modest increase of 14 cents, or 0.17% to $80.19 per barrel.

The recent fluctuations come after both benchmarks posted significant gains of around 2% on Monday, marking their highest closing prices since April.

The market’s attention has now shifted back to fundamental factors, which have exhibited signs of softness for some time.

Francisco Blanch, a commodity and derivatives strategist at Bank of America, noted in a client note that global crude oil inventories and refined product storage in key locations such as the United States and Singapore remain elevated.

“The oil market shifted its focus back to fundamentals, which have been soft for some time,” Blanch stated, highlighting the broader concerns about global demand growth.

Data from the first quarter of the year indicated a deceleration in global oil demand growth to 890,000 barrels per day year-on-year, with further slowing likely in the second quarter.

Also, according to the country’s statistics bureau, China’s oil refinery output fell by 1.8% year-on-year in May due to planned maintenance and higher crude costs.

Market participants are also keenly watching for further indications on interest rates and U.S. demand trends, with several U.S. Federal Reserve representatives scheduled to speak later on Tuesday.

Despite the mixed signals, some analysts remain optimistic about the impact of OPEC+ supply cuts.

Patricio Valdivieso, vice president and global lead of crude trading analysis at Rystad Energy, said, “The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025.”

Valdivieso further noted the disconnect between OPEC+’s demand outlook and those of other agencies, making it challenging to adopt a fully bearish stance on the market.

This sentiment has been reinforced by recent investor behavior, with hedge funds and other money managers purchasing the equivalent of 80 million barrels in key petroleum futures and options contracts over the week ending June 11.

Support for the market has also come from a rebound in refining margins, particularly in Europe and Asia.

Sparta Commodities analyst Neil Crosby pointed out that refining margins at a typical complex refinery in Singapore averaged $3.60 a barrel for June so far, up from $2.66 a barrel in May.

As the market navigates these dynamics, the cautious optimism among investors and analysts suggests a period of continued volatility and adjustment, with fundamental factors and policy decisions playing pivotal roles in shaping future price movements.

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Energy

Dangote Refinery’s Power Production Dwarfs National Grid’s 11-Year Progress

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The stark contrast in power generation between Nigeria’s national grid and Dangote Refinery has come into sharp focus as Dangote Refinery generates twice the national power production.

Over the past eleven years, Nigeria has managed to add a mere 760 megawatts (MW) to its national grid, while the Dangote Refinery has outpaced this growth significantly with  1,500 MW in a much shorter timeframe.

For decades, Nigeria has grappled with chronic power shortages, an issue that has repeatedly dominated election campaigns and policy debates.

Data from the Nigeria Electricity System Operator revealed that power delivery from Generation Companies (Gencos) to Distribution Companies (Discos) via the Transmission Company of Nigeria (TCN) has seen only a modest increase.

From an average of 3,400 MW in November 2013, it has risen to 4,160 MW as of June 12, 2024, marking a 22 percent increase.

In stark contrast, the Dangote Refinery, which began construction in 2018, now produces 1,500 MW of power for its operations.

This significant output not only surpasses the national grid’s decade-long expansion but also emphasizes the private sector’s ability to address Nigeria’s power challenges more efficiently.

“We don’t put pressure on the grid. We produce about 1,500 megawatts of power for self-consumption,” stated Aliko Dangote at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.

This development underscores concerns regarding the slow pace of growth in Nigeria’s power sector despite substantial investments and an 11-year-old privatisation effort.

“The government and some operators in the sector may claim there has been some form of growth since 2013, but in actual terms, how many people are benefiting from the privatised power sector?” questioned Charles Akinbobola, a senior energy analyst at Sofidam Capital.

He added, “The challenge of the power sector has not entirely been the scarcity of funds. Several trillions of naira have been pumped into that industry. The sector has been plagued by the shortcomings of its managers.”

Comparatively, Nigeria’s power production capacity of 13,000 MW falls significantly short of South Africa’s 58,095 MW, despite having a similar-sized economy and a quarter of Nigeria’s population.

The ageing national grid, however, delivers only about 4,000 MW to over 200 million citizens—roughly the power consumption of Edinburgh’s 548,000 residents.

Other African nations have made more significant strides in addressing their power needs.

Egypt, for instance, added 28,229 MW to its national grid between December 2015 and December 2018, achieving a total installed capacity of 58,818 MW.

This was accomplished through a fast-track project and a substantial partnership with Siemens, adding 14,400 MW in just 2.5 years.

The sluggish growth of Nigeria’s power sector is not just a technical issue but a significant economic one. Rising energy costs and unreliable power supply have disrupted productive activities, forcing many factories to self-generate more than 14,000 MW of electricity.

According to the Manufacturers Association of Nigeria, member companies spent N639 billion on alternative energy sources between 2014 and 2021, further highlighting the inefficiencies within the public power supply system.

“The power sector’s inefficiencies cost consumers billions of naira and stifle economic growth,” noted Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “There are issues of technical and commercial losses which are yet to be addressed. These inefficiencies are costs that consumers are compelled or expected to pay for as part of the cost recovery argument.”

The stark contrast in power generation between the Dangote Refinery and the national grid serves as a wake-up call for Nigeria’s power sector.

It underscores the urgent need for comprehensive reforms, better management, and increased investment to meet the growing energy demands of the nation’s burgeoning population.

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Crude Oil

Nigerian Oil Theft Escalates to 400,000 Barrels a Day, Exposing Systemic Corruption

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A recent report has revealed that Nigeria’s daily oil losses surged to 400,000 barrels as efforts to curb crude oil theft remain ineffective.

This escalation from 100,000 barrels per day in 2013 underscores the severe and worsening challenge facing the nation’s oil sector.

The report, produced by the public policy firm Nextier, is the result of several months of in-depth investigation.

It reveals a complex web of sophisticated networks involving powerful actors, foreign buyers, security personnel, transporters, and government officials.

This elaborate system facilitates the large-scale theft of crude oil, which has been a significant drain on Nigeria’s economy.

From 2009 to 2021, Nigeria lost 643 million barrels of crude oil, valued at $48 billion, due to theft. This loss represents more than half of the nation’s national debt as of 2021.

The situation has also severely impacted Nigeria’s ability to meet its OPEC quotas, which have dwindled from 2.5 million barrels per day in 2010 to just 1.38 million barrels per day.

The report, authored by Ben Nwosu, an associate consultant at Nextier, and Ndu Nwokolo, a managing partner at Nextier, paints a grim picture of the local dynamics fueling this crisis.

It highlights the involvement of multiple small-scale artisanal actors, who are often supported by local political and security forces. These local actors contribute to the creation of underground economies, further complicating efforts to curb theft.

Environmental hazards are another grave concern. Illegal refining processes, characterized by uncontrolled heat and poorly designed condensation units, have led to numerous explosions. Between 2021 and 2023 alone, these operations resulted in 285 deaths.

Despite these dangers, illegal refineries continue to thrive due to economic necessity and systemic corruption.

Nigeria’s four refineries, which have a combined capacity of 445,000 barrels per day, are currently operating at only 6,000 barrels per day due to mismanagement and corruption.

This shortfall forces the country to rely heavily on imported refined products, further exacerbating the situation.

Massive corruption in oil importation and subsidies has led to billions of naira being unaccounted for between 2016 and 2019.

Moreover, the government’s inability to support modular refineries has perpetuated reliance on illegal operations.

Security forces are often implicated in the theft, providing protection for a fee. Although recent measures, such as the destruction of illegal refineries, have offered temporary relief, these efforts have been short-lived.

New illegal operations quickly emerge, perpetuating the cycle of theft and corruption.

The authors of the report emphasize that addressing this complex issue requires more than punitive measures. They call for a comprehensive approach that tackles the root causes, including the need for effective governance and economic opportunities for affected communities.

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