Oil
Nigerian crude may not find market in US in 2013
LAGOS— The United States, the highest importer of Nigeria crude, now gets so much crude from its own shale deposits that Canadian exporters to US are selling as far afield as Europe, showing how deeply the US energy revolution is transforming global oil flows according to international oil market report by Reuters.
According to the report as recently as 2011, close to 100 per cent of Canada’s crude exports went to its neighbour the United States, according to the US government’s Energy Information Administration (EIA).
But trade and shipping sources said more than two million barrels of light crude from Canadian offshore oilfields have gone to Europe in the last month, in a test of what is to come. The change is due to technological advances the US expects will bring 900,000 barrels per day (bpd) record jump in its oil output to 7.3 million bpd in 2013, from places like the Bakken shale deposit in North Dakota that now feeds U.S. East Coast refineries served by Canada.
But here at home, executive arm of government is at war with the legislators on the right budget bench mark for crude oil, but the oil market equation is fast changing against Nigeria. While the executive favour the use of $75 per barrel, the legislators pegged the budget at $79.
US refineries’ traditional suppliers in West Africa, notably Nigeria, are also having to seek alternative customers and are feeling the pinch of the new Canadian competition in their established European markets.
“Globally, Canada has been trying all the exports routes. US east coast refineries are also taking more from Bakken fields so that should replace the flow from Canada and West Africa,” said Olivier Jakob of consultancy Petromatrix.
The drilling technique hydraulic fracturing, or fracking, in which water, sand and chemicals are forced deep underground to drive out trapped oil and gas, have allowed access to millions of barrels of U.S. oil that were previously unattainable.
This shale oil is sweet – meaning it has low sulphur levels and is suitable for the U.S. refiners – like the Canadian oil it is supplanting. So it is only these light Canadian crude grades, such as Hibernia, that have been exported to Europe.
“Shale oil is making its way to the east coast of the United States by rail so this is backing out offshore sweet east coast Canadian production,” said a trader with a European refiner. The trader said that the profit margin had widened sufficiently for arbitrage as it allowed for a nominal profit of nearly $1 million on an 600,000 barrel shipment. Arbitrage denotes sale or buy opportunities, which arise with price gaps between regions that normally trade rarely or not at all.
Trade and shipping sources said two Hibernia cargoes of 600,000 barrels each arrived at Britain’s east coast in late December to early January. A Hibernia cargo of 1 million barrels is due to load from Whiffen Head, a Canadian offshore loading platform, this week and will go to Valero’s Pembroke refinery, trade sources said. Hibernia is the largest stream of three sweet crude oil grades produced in the Grand Banks formation, off Newfoundland, along with Terra Nova and White Rose. Canadian eastern offshore production was around 265,000 bpd in 2010, according to the EIA.
Crude produced in inland Canadian provinces such as Alberta is not currently linked to the east coast by pipeline, limiting the potential for future shipments to Europe.
DIVERTED CARGOES
Rising U.S. shale oil output has already started re-routing flows of West African and Algerian light, sweet crude oil which used to flow regularly to the United States. U.S. imports of light, sweet crude will fall to virtually zero by 2014, an executive of French energy company Total’s trading arm predicted in October. This progressive upheaval in crude oil patterns has prompted European refiners to look at changing their slates – lists of suitable crude oil grades for use as feedstock – to adapt.
India’s Essar Oil Ltd, which owns the 296,000 bpd Stanlow refinery on Britain’s east coast, has taken Canadian grades, a spokesman said. “(Hibernia) was one of the 11 additional crudes we have added over the past year or so at Stanlow as part of initiatives to lower our crude costs and improve margins.” Traders said that the extra volumes of Canadian crude arriving in Europe have depressed prices for Nigerian grades, which have fallen around $1 since early December.
“(Canada) is not that far, if you can contemplate lifting West African then you might as well take Canadian,” one European trader who has previously bought Canadian oil said. The crude trade from Canada to Europe has until now rarely been profitable except at times when severe supply disruption made the shipping cost worthwhile. During the Libyan war of 2011, Hibernia arrived in the Mediterranean as traders sought substitutes for Libya’s light sweet crude. Cargoes of Terra Nova and White Rose have occasionally crossed the Atlantic to Northwest Europe.
Total Canadian crude oil production was around 3 million bpd in 2011, with about 70 percent heading to refineries in the U.S. Midwest, according to the EIA. While oil from Canada’s eastern coast can find other buyers, much onshore crude output is trapped in the continent’s centre, as infrastructure to target the Asian market remains limited.
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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