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Oil Theft: Nigeria Lost $3.5 Billion In 2021 – Report

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Oil theft, especially in a developing country like Nigeria is a major factor in the country’s declining economic growth.

Experts revealed that in 2021 alone, Nigeria’s oil revenue loss was  $3.5 billion, amounting to about 10 percent of the country’s foreign reserves. The year ended with a report that Nigeria, the largest oil and gas producer in Africa, experienced a deficit of almost 200 million barrels of crude in the first 11 months of the year, mainly due to oil theft.

In November 2015, thieves stole $250 million worth of crude from just one pipeline, around half a billion liters. With this incessant oil theft crime, it is almost impossible for to meet its OPEC quota of 1.68 million bpd of crude for January 2022.

A report by OilPrice revealed that cartels in the Niger Delta region generally steal crude by ‘hot tapping’ – attaching a secondary pipeline to a mainline, or ‘cold tapping’ – blowing up a pipeline and replacing it with their own. They then export this oil illegally to countries such as Ghana, Cameroon, Cote d’Ivoire, and South Africa while some even reach the international market, with exporters bribing officials that control the transportation of the product to turn a blind eye.

Investors King also gathered that this menace is gradually driving international investors away, as oil majors are now taking their money to more reliable markets with better monitoring and surveillance practices.

Remarkable examples are Shell, ExxonMobil, Chevron, and Total who have all already moved their operations to other regions, despite Nigeria being Africa’s biggest producer.

In view of this, there is a need to invest more in technologies that could monitor oil.

A report on ‘5 Emerging Technologies That Will Make Natural Gas Exploration & Production Safer In 2020’, noted that the oil and gas industry has begun to benefit from the development of more advanced technology.

With the development of this technology, oil and gas companies have been able to use sources of technology that are smarter and which are also more efficient.

According to the report, these oil and gas software solutions include artificial intelligence, big data analytics, electric monitoring, and drone technology.

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Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

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Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

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Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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Dangote Refinery Clash Threatens Nigeria’s Oil Sector Stability

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Nigeria’s oil and gas sector is facing a new challenge as a dispute between Dangote Industries Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) intensifies.

The disagreement centers on claims by NMDPRA that diesel from the Dangote Refinery contains high sulfur levels, making it inferior to imported products.

The $20 billion Dangote Refinery, located near Lagos, has the potential to process half of Nigeria’s daily oil output, promising to reduce dependency on foreign fuel imports and create thousands of jobs.

However, the recent accusations have cast a shadow over what should be a significant achievement for Africa’s largest economy.

Industry experts warn that the ongoing conflict could deter future investments in Nigeria’s oil sector.

“Regulatory uncertainty is a major disincentive for investors,” said Luqman Agboola, head of energy at Sofidia Capital. “Any factor affecting foreign investment impacts the entire value chain, risking potential energy deals.”

The regulatory body, led by Farouk Ahmed, maintains that Nigeria cannot rely solely on the Dangote facility to meet its petroleum needs, emphasizing the need for diverse sources.

This position has stirred controversy, with critics accusing the agency of attempting to undermine a vital national asset.

Amidst these tensions, energy analyst Charles Ogbeide described the agency’s comments as reckless, noting that the refinery is still in its commissioning stages and is working to optimize its sulfur output.

In response, Dangote Industries has called for fair assessments of its products, asserting that their diesel meets African standards.

The refinery’s leadership argues that certain factions may have ulterior motives, aiming to stifle progress through misinformation.

As the dispute continues, the broader implications for Nigeria’s oil sector remain uncertain. The outcome will likely influence not only domestic production but also the country’s standing in the global energy market.

Observers hope for a resolution that supports both industrial growth and regulatory integrity, ensuring stability in a sector crucial to Nigeria’s economy.

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