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Russia-Ukraine: Shell Exits Russia Oil Market After One Last Purchase

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British multinational oil and gas company, Shell PLC has disclosed that it will no longer patronise Russia for its hydrocarbons, including oil and natural gas.

This is coming after Russia launched an attack on Ukraine that has lasted for over a week. Shell’s exit from the Russian oil market will make it one of the first major Western Oil Companies to dump Russia entirely since the attack on Ukraine.

Although the company disclosed last week that it would pull out of its Russian operations, including the Sakhalin 2 LNG plant in which it holds a 27.5% stake and which is operated by Gazprom, the company was said to have bought oil from Russia in the same week.

Disclosing that Shell PLC will no longer continue with Russia, Chief Executive Officer Ben van Beurden apologised for making the last purchase: “We are acutely aware that our decision last week to purchase a cargo of Russian crude oil … was not the right one and we are sorry.”

Russia has been served a number of international sanctions since the country invaded Ukraine, however, Russia’s crude oil and gas has been exempt from Western sanctions so far.

Despite no sanctions on oil and gas in Russia, reports reveal that oil soared above $139 a barrel on Monday, 7th March – a recorded highest since July 2008. U.S. President Joe Biden has also sanctioned Russian oil tankers with the British and Canadian government banning Russian vessels from landing at their ports in protest against the invasion.

In another report, French multinational company, TotalEnergies disclosed that the company had completely stopped buying oil from Russia, although one of its landlocked refineries in Germany continued to receive Russian crude by pipeline.

While Shell has revealed that it would change its crude oil supply chain to remove volumes from Russia ‘as quickly as possible’ and also shut its service stations in Russia, as well as its aviation fuels and lubricants operations in the country, the resultant effect of this may be a problem in the long run.

Investors King recalls that Russian ruler Vladimir Putin has threatened any country or body that stands against its military action with sanctions and isolation. Some experts project that the Russian government may consider tagging these companies as ‘filed for bankruptcy’ and thereby nationalising their assets.

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NNPC, Sahara Group To Invest Over N150B in Two Gas Carriers

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Gas Exports Drop as Shell Declares Force Majeure

The Nigerian National Petroleum Company Limited (NNPC) and leading energy conglomerate, Sahara Group have taken delivery of two 23,000 CBM Liquefied Petroleum Gas (LPG) vessels at the Hyundai MIPO Shipyard in Ulsan, South Korea.

The new carriers, the MT BARUMK and MT SAPET, have brought NNPC and Sahara Group’s joint venture investment to over N150 billion ($300 m), bringing the Joint venture’s (JV) gas infrastructure pledge to $1 billion by 2026 closer to reality. MT Sahara Gas and MT Africa Gas were previously part of the fleet. Hyundai MIPO Dockyard, a leading global constructor of mid-sized carriers, produced all four ships.

Recall, Investors King reported that Nigeria earned $868.5 million from gas exports and N13.36 billion from domestic gas sales, according to an examination of the gas revenue statistics and other monthly reports acquired from the Nigerian National Petroleum Company Limited.

Data from the oil firm showed that the Federal Government, through NNPC, garnered the funds from the sale of Natural Gas Liquids/Liquefied Petroleum Gas, as well as Nigeria Liquefied Natural Gas feedstock.

West African Gas Limited (WAGL), a joint venture between NNPC and Oceanbed (a Sahara Group subsidiary), is driving NNPC’s five-year $1 billion investment plan which was announced in 2021, to expedite the decade-long gas and energy transition strategy.

To the joy of visitors, NNPC’s GMD, Mele Kyari, announced that an order for three more new vessels was being finalized, adding, “We have an objective of delivering 10 vessels over the next 10 years. In our energy transformation quest, the NNPC and our partners stand out for their integrity, and our commitment to environmental sustainability is steadfast.”

WAGL and Sahara Group have invested in the JV with MT BARUMK and MT SAPET. WAGL is strengthening its gas fleet and terminal infrastructure, while Sahara Group continues to make significant progress in the development of over 120,000 metric tonnes of storage facilities in 11 African nations, including Nigeria, Senegal, Ghana, Cote d’Ivoire, Tanzania, and Zambia.

“This is another epoch-making achievement for the NNPC and Sahara Group, and we remain firmly committed to delivering more formidable gas projects for the benefit of Nigeria and the entire sub-region,” Kyari said.

Executive Director Sahara Group, Temitope Shonubi stated that “WAGL has successfully operated two mid-sized LPG Carriers MT Africa Gas and MT Sahara Gas in the region in accordance with worldwide standards, transporting over 6 million CBM of LPG across West Africa, with the new vessels, we will be able to accelerate and lead Africa’s energy revolution.”

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NMPRA Set to Draft Six Regulations Governing Operations

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The Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMPRA) has issued six regulations to govern its Midstream and Downstream operations.

This comes on the heels of a sum of N58bn from N500bn bridging claim the Federal Government paid to the Independent Petroleum Marketers of Nigeria (IPMAN)  through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Investors King gathered that an official statement released by the Corporate Communications of NMDPRA noted that the joint agency stated that the amount disbursed to the association is the highest they had paid within six months span by former fund administrators.

Engineer Farouk Ahmed, the Authority’s Chief Executive explained that the aim was to improve business processes, bring clarity, and ease of doing business in the sector. NMDPRA said that it was aware of the matters raised by the petroleum marketers and the difficulties being faced by the association members due to the unpaid N500bn bridging claims.

He explained that a team led by Mr Ogbugo K. Ukoha, Executive Director, Distribution Systems, Storage and Retailing Infrastructure (DSSRI) has been set up to review the draft regulations, and engage and consult stakeholders for smooth implementation when released.

The six regulations include Environmental Management Plan, Gas Pricing, Environmental Remediation Fund, Decommissioning and Abandonment, Gas Infrastructure Fund, and Gas Pipeline Tariff.

“One of our key concerns is boosting local refining. Dangote and BUA refineries are coming on board, however, we want to see more companies investing in refineries so we can stop the importation of refined petroleum products, save our foreign earnings, create jobs and add value to the economy”, Ahmed said.

Ahmed further noted the gradual growth of indigenous players in the local exploration and production of petroleum products.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (Otherwise known as “The Authority”) was created in August 2021 in line with the Petroleum Industry Act 2021 which provides a legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry as well as the development of Host Communities.

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Crude Oil Dips on Prolong Chinese Lockdown

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Global oil prices dipped slightly on Monday as economic reports revealed Chinese retail sales dropped 11% year-on-year in the month of April following the nation’s decision to extend the COVID-19 lockdown to about 46 cities.

Brent crude oil, against which Nigerian oil is priced, dropped to $108.96 per barrel on Monday before rebounding to $112.66 after reports showed Saudi Arabia’s crude oil export declined to 7.235 million barrels per day (mbpd) in the month of March. This represents a decline of 1% from 7.307 million bpd reported in February.

Also, crude oil prices were supported by reports that European Union could reach a deal to impose additional sanctions on Russia for invading Ukraine. According to European Union diplomats and officials, the new sanctions will target Russian crude oil.

However, at Investors King we are expecting the drop in Russia’s crude oil supply to be balanced out by the expected drop in Chinese crude oil imports due to the COVID-19 lockdown. Therefore, will expect oil prices to remain around the current level in the near term.

“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near $110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory.

It is important to note that despite Saudi Arabia’s crude oil exports dropping by 1%, crude oil production jumped to its highest level in about 24 months at 10.300 million bpd, up from 10.225 million bpd produced in the previous month.

Meanwhile, concerns over falling oil inventories in the United States bolstered gasoline futures to an all-time high on Monday.

“Oil prices will remain bullish, especially WTI’s near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

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