Oil
U.S. opens taps, a bit, on oil exports to Europe
NEW YORK – The U.S. government has authorized limited crude oil exports to Europe, for the first time in years, raising new questions about how companies are testing the limits of a controversial, decades-old exports ban.
The Department of Commerce has granted two licenses to export U.S. crude to the UK since last year and another two to Italy, according to data Reuters obtained through a Freedom of Information Act request.
One application for German exports was filed in January and is awaiting a decision by the Bureau of Industry and Security (BIS), which is responsible for reviewing requests to export crude under a 1975 law that bans most shipments with a few exceptions, including sales to Canada and re-export of foreign oil.
These are the first permits for shipments to the UK since at least 2000 and the first to any European country since 2008, according to data from the BIS. The bureau has approved 120 licenses since January 2013, nearly 90 percent of which were for sales to Canada, the data show.
It was not immediately clear under which provisions BIS granted the European export licenses. The current regulation allows foreign crude to be re-exported from the United States if it is not commingled with U.S. crude, an option that some Canadian producers are said to be using.
In rare cases, the regulation permits the exchange of U.S. oil for foreign crude or refined products of higher value, which has become an attractive option with the growing surplus of light, sweet shale oil.
Whatever the case, the licenses could add to the growing debate in Washington on the benefits and pitfalls of lifting the ban, among the year’s most urgent energy policy questions, as the relentless rise in shale oil production threatens to saturate domestic refiners as soon as this year.
They may add to expectations that the Obama administration will allow companies to use provisions in the existing regulation to slowly increase exports, while stalling on a decision on whether to scrap the ban.
With U.S. oil production at a 25-year high, many oil producers are eyeing other markets and have called for an end to the ban on exports, which they consider a relic of the 1970s, when the Arab oil embargo led to steep prices at the pump.
Alaskan Republican Lisa Murkowski, the Senate Energy and Natural Resource Committee’s top Republican, has backed that position.
On the other side, independent U.S. refiners, which stand to benefit from cheaper domestic crude, have argued against easing restrictions.
Senator Ron Wyden, chairman of the Energy and Natural Resources Committee and a Democrat of Oregon, warned at a hearing last week that “a number of influential voices” that want to export oil could drown out the risks for the average consumer.
If more exports to Europe are allowed, refiners across the Atlantic may have cause to celebrate since access to cheap, high-quality U.S. shale oil would help revive their margins.
The BIS did not respond to frequent requests for information on the nature of the licenses. It declined to comment on the identity of the exporting companies, citing exceptions in the Export Administration Act.
The bureau’s data does not show which permits were used, and the Department of Energy’s oil export data does not show any crude shipments to Europe through November 2013.
EUROPEAN EXPORTS A RARITY
Exports of crude to Canada were initially approved by President Ronald Reagan in the 1980s, and have picked up rapidly in recent years. The United States sent about 200,000 barrels of oil a day to Canada in November, the highest volume since 1999, data from the Department of Energy shows.
A handful of licenses have also been regularly approved over the past decade for countries in central America or Asia, either for the export of heavy California crude or the re-export of foreign-origin oil, according to a BIS statement released last year.
But European countries have rarely appeared on the list. Two permit applications filed in 2011 for exports to Switzerland and one for exports to the Netherlands were not approved.
The two approved UK permits were for shipments with a total maximum value of $1.8 billion, while those to Italy were valued at $3.12 billion. The application for German exports was worth $2.6 billion, the data show.
Theodore Kassinger, a partner with the law firm O’Melveny and Myers in Washington who previously served as the deputy secretary and general counsel of the Department of Commerce, said the bureau likely stuck to existing provisions to allow exports to Europe.
“The licenses were likely within the confines of the current law and so they may have involved re-exports of foreign-origin oil,” he said.
Without established trade routes or tanker rates, it is difficult to compare the economics of exporting Canadian heavy oil sands versus shipments of U.S. light-sweet oil to Europe. Few traders have examined the value of such unprecedented shipments.
While Canadian crude trades at deep discounts to the U.S. benchmark futures contract, most European refiners are not configured to process the heavy oil.
Ultra light, low-sulfur Bakken, on the other hand, would be welcome in Europe, but trades at relatively higher prices in the United States where local refiners are still eager to replace imported crude with the domestic grade.
EXPORT EXPANSION SUGGESTS OIL SWAPS
Others said oil volume swaps — whereby companies can export U.S. light oil for a higher quality or volume of crude or refined fuels — may be behind the recent expansion in export licenses to Europe.
“The implication is that we are not exchanging a higher value item for a lower value,” said Ed Morse, global head of commodity research at Citi, while noting that re-exports of Canadian heavy oil from U.S. shores are on the rise.
Applicants for such licenses have to demonstrate that the trade is part of an overall transaction in the nation’s interest and the oil cannot be sold for a reasonable price in the United States.
Sellers also have to prove that exports will be terminated if U.S. supplies are seriously threatened.
“I am skeptical that it was a swap because tests for such exports are very complicated,” Kassinger said, referring to sellers’ onus to prove that they can’t sell the oil at a profit within the country.
“But the time will not be very far when it will not be commercially viable to market the crude in the country,” he said.
– REUTERS
Oil
FG Introduces New Incentives To Revitalize Nigeria’s Oil & Gas Industry
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.
Business
Tinubu set to approve ExxonMobil-Seplat oil deal, expands CNG bus initiative
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.
Oil
ExxonMobil To Invest $10bn In Nigeria’s Deep-Water Oil Operations
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.