Oil
US oil companies seek end to export ban
NEW YORK — American oil companies have not been allowed to export crude for 40 years, but the industry wants to change that, even though the U.S. still consumes far more oil than it produces.
A surprising surge in domestic production of light, sweet crude — a particular type of oil that foreign refiners covet — has triggered growing calls to lift the restrictions, which were put in place after the Arab oil embargo of 1973.
But the idea is touching a nerve that remains raw four decades after oil shortages crippled the economy and led to the law that banned crude exports without a special license.
“For 40 years, energy policy has been shaped by that experience of the 1970s,” says Daniel Yergin, energy historian, author and vice chairman of the research and analysis firm IHS. “But we are in a different world.”
Skeptics worry that lifting the restrictions would lead to higher gasoline prices and decreased energy security. Economists and analysts argue that it would have little or no effect on prices, largely because the U.S. already exports record amounts of gasoline and diesel, which are not restricted.
Big oil seeks change
Some experts say allowing crude exports could actually improve energy security by encouraging more domestic production.
Major oil companies such as Exxon Mobil and ConocoPhillips, along with the American Petroleum Institute, an oil and gas lobbying group, are the biggest proponents of ending the ban.
On Tuesday, Alaska Sen. Lisa Murkowski released a paper on energy exports describing the nation’s export laws as “antiquated” and urging President Barack Obama and the Senate to allow crude exports. Late last year, Energy Secretary Ernest Moniz suggested it may be time to revisit export laws.
But easing restrictions will be politically difficult, especially in an election year. In a recent letter to Obama, New Jersey Sen. Robert Menendez made an argument that is likely to resonate with voters: “Crude oil that is produced in the U.S. should be used to lower prices here at home, not sent to the other side of the world.” There has been a huge turnaround in domestic production in states such as North Dakota and Texas. The U.S. is producing more crude oil than it has in 25 years, and the government predicts production will approach its 1970 peak of 9.6 million barrels per day in 2016.
System ‘out of whack’
That’s still not nearly as much as we consume. The U.S. still imports an average of 7.5 million barrels of crude every day, more than any other country but China.
The issue is that refineries around the world have spent billions of dollars to gear up to process specific types of crude oil they expected to receive. But a boom in U.S. production put the global refinery system “out of whack,” Yergin says.
In the U.S., refiners expected to import more crude from Venezuela and the Middle East, a relatively thick oil that is high in sulfur and known as heavy, sour crude. Many refineries abroad can more easily handle light, sweet crude, which is thinner, lower in sulfur and easier to refine into gasoline and diesel.
But in a surprise, U.S. drillers are producing so much light, sweet crude that U.S. refiners can’t use it fast enough, and a relative glut has emerged. U.S. oil prices are lower than global oil prices by $10 per barrel or more.
Refiners enjoying lower prices for U.S. crude — and others worried about domestic fuel prices — say allowing exports would raise costs for the industry and for American consumers. By taking away the price advantage U.S. refiners enjoy, oil companies might produce less fuel, invest less in the U.S. and hire fewer people.
Costs and jobs
“It’s a jobs issue,” says Bill Day, a spokesman at Valero Energy, one of the nation’s biggest refiners. “The Gulf Coast of the U.S. has become a refining hub for the rest of the world. That keeps American refineries open and American workers on the job.”
But it’s not that simple, others say.
If the ban were lifted, some U.S. refiners would probably have to pay more for American crude, but many U.S. coastal refiners already depend on more expensive international crude. And eliminating the ban could lower costs for other refineries.
Lifting the ban, experts say, is likely to have a bigger effect on individual refinery profits than on consumer prices.
“It probably doesn’t change the retail price at the pump, but it may change the incentive for refiners,” says Kevin Book, managing director at ClearView Energy Partners.
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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