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Gas Scarcity Inevitable as NLNG Shut Operations Due to High Floodwater

Nigeria Liquefied and Natural Gas (NLNG) declared a force majeure to its partners due to widespread flooding that has disrupted supply.

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Oil and Gas

Nigeria Liquefied and Natural Gas (NLNG) declared a force majeure to its partners due to widespread flooding that has disrupted supply.

This declaration could worsen Nigeria’s revenue and foreign exchange scarcity which is already at an abysmal situation.

Force majeure is a clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties happens. 

Such events or circumstances could be war, strike, riot, crime, epidemic or sudden legal changes which could prevent one or both parties from fulfilling their obligations under the contract.

Investors King had earlier reported that the production capacity of the Nigerian Liquified Natural Gas Limited (NLNG) has dropped by 40 percent. The drop was a result of overwhelming theft and the vandalism of oil and gas pipelines. 

No doubt, the subsequent cease of operation will further worsen the gas situation in Europe. Nigeria is a major supplier to some European countries, particularly Portugal. 

It will be recalled that Portugal Energy Minister, Duarte Cordeiro stated that his country could face supply problems this winter if Nigeria did not deliver all its supplies.

Europe has been in the middle of gas shortage since the European Union put an embargo on the importation of Russian gas due to its invasion of Ukraine. 

Several countries in Europe including the UK are already at serious risk of gas shortage. 

According to the chief executive of Shell, Ben van Beurden, he noted that the shortage of gas in Europe could last for several winters. 

“It may well be that we will have a number of winters where we have to somehow find solutions,” he said.

According to the spokesperson of NLNG, Andy Odeh, “The notice by the gas suppliers was a result of high floodwater levels in the operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG,”

Odeh however stated that NLNG is in process of examining the extent of the disruption and would try to mitigate the impact of the force majeure. 

Meanwhile, before the force majeure, Investors King understands that production from NLNG’s six-train Bonny plant had dropped to 16.8 million tonnes in 2021, from 20.7 million tonnes capacity in 2020. This has caused the company to lose more than $7 billion in revenue. 

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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Expert Warns Against Palm Oil Adulteration, Cites Health Risks

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palm oil

Amidst concerns over the quality of palm oil in Nigeria, Professor Kehinde Owolarafe of Obafemi Awolowo University, Department of Agriculture and Environmental Engineering, has sounded a clarion call, warning producers, distributors, marketers, and retailers against the perilous practice of adulteration.

At a recent workshop organized by the Standards Organisation of Nigeria (SON) in Osogbo, Osun State, Owolarafe underscored the potential health hazards posed by adulterated palm oil.

Highlighting the historical significance of Nigeria in palm oil production, Owolarafe lamented the country’s decline from a leading producer to the fifth position globally, trailing behind Indonesia and Malaysia.

Despite an increase in local production, Nigeria still imports approximately one million metric tonnes of palm oil to meet domestic demand.

Factors contributing to Nigeria’s dwindling palm oil production include aging oil palm plantations, inadequate processing technologies, and unfavorable government policies towards agriculture.

Owolarafe urged industry stakeholders to prioritize improving both the quality and quantity of palm oil production to meet international standards and revitalize the sector.

Dr. Ifeanyi Okeke, represented by SON’s Southwest Director, Ethan Talatu, emphasized the workshop’s aim to raise awareness among stakeholders regarding the importance of adhering to government-set standards.

The event sought to instill a collective commitment to producing palm oil that meets stringent quality criteria.

Amidst growing concerns over the health implications of consuming adulterated palm oil, stakeholders are urged to heed Owolarafe’s warning and prioritize quality assurance measures.

Ensuring the integrity of Nigeria’s palm oil supply chain is not only essential for public health but also crucial for revitalizing the nation’s palm oil industry on the global stage.

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Commodity Trading Industry Hits $100 Billion Profit, Second-Best Year on Record

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Zambian economy

The global commodities market has reported $100 billion in profits despite facing challenges and disruptions, making its second-best year ever. 

According to analysis from consultancy firm Oliver Wyman LLC, while earnings have dipped slightly from the record-breaking levels of 2022, this year’s profits easily surpass previous highlights, including those seen during the global financial crisis of 2008-2009.

Consultant Adam Perkins attributes this success to favorable margins driven by ongoing supply-demand dynamics, despite the volatility seen in various sectors.

While specific financial results for many players within the industry are yet to be made public, the report indicates that major independent trading houses are expected to show an average drop of over 30% from the record levels of 2022.

However, disruptions in supply chains and shortages of diesel and fuel oil have somewhat offset the decline in volatility related to Russian crude oil.

These profits have enabled commodity trading firms to bolster their positions as key providers of energy, metals, and food resources on a global scale.

With significant investments in oil refineries, storage facilities, power plants, and acquisitions of other trading companies, these firms are solidifying their roles in shaping global supply chains.

Moreover, the windfall profits have led to executives and partners within these firms becoming multi-millionaires, facilitating a generational shift in leadership as seasoned traders retire.

Despite the pressure to uphold legacies and navigate increased scrutiny, the influx of new leadership presents opportunities for innovation and growth within the commodity trading sector.

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