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Nigeria’s loss of US oil market ominous for 2013 budget

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LAGOS – Nigerians whose pastime is bickering over oil resources may soon find out that what they consider as the goose that lays the golden eggs will no longer give them the resources to steal from. Oil may soon be selling for far below the 1982 price level. No thanks to President Barack Obama who, during his first term inauguration urged Americans to find a solution to the country’s continued dependence on external oil. Five years down the line, America is almost self- sufficient in oil production and is now turning down offers from traditional suppliers.
America is one country where when the government decides on a line of action, it follows through. But in Nigeria, for over two years now, the issue of the Petroleum Industry Bill passage has been with us without progress. While others are busy finding alternative to crude oil as means of energy, Nigeria’s policymakers are busy stealing the little resources available to diversify the economy. Shamefully, just last week, former President of Botswana said at Daily Trust Forum that it amounts to criminal negligence for Nigerian leaders to continue to steal the people’s resources entrusted to them through corrupt practices.
Nigeria’s loss of US oil market ominous for 2013 budgetLast week, the news wire services were awash with reports that the United States, the highest importer of Nigeria’s 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 U.S. energy revolution is transforming global oil flows. As recently as 2011, close to 100 per cent of Canada’s crude exports went to its neighbour, the United States, according to the U.S. 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, a taste of what is to come. The change is due to technological advances the U.S. 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.
While this revolution is taking place in the international oil market, Nigeria’s federal executive arm of government is at war with federal legislators on the right budget benchmark for crude oil, but the oil market equation is fasting changing against Nigeria. While the executive favours the use of $75 per barrel, the legislators pegged the budget at $79. Both parties will soon discover that they have been too optimistic about the international oil market. From the look of things, both sides should review the budget and reduce the benchmark to $60 per barrel.
US refineries’ traditional supplier, Nigeria, is to seek alternative customers and is feeling the pinch of the new Canadian competition in its established European markets. Besides Canada, other traditional suppliers to US market will seek customers in Europe and Asia. If most suppliers of crude are now to face a shrinking market in Europe, one thing is sure, the price of crude will nosedive southward, meaning a crash in prices of crude. This apparently will derail the 2013 budget, no doubt.
Hitherto, US oil reserves have been too expensive to recover using old technology. New technology of a drilling technique called 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 U.S. refineries – like the Canadian and Nigerian oil it is supplanting.
To the average American oil trader, Shale oil is making its way to the east coast of the United States by rail instead of shipping from long distance, so this is backing out offshore sweet east coast Canadian and Nigerian production. For oil traders, the profit margin had widened sufficiently for arbitrage as it allowed for a nominal profit of nearly $1 million on 600,000-barrel shipment.
The question is, where is Nigerian NNPC seeking new markets? Apparently as it is with Nigeria, they have gone to sleep until one day, they find that there is no market for Nigeria crude. What then will happen? Federal allocation to states will dwindle, salaries will remain unpaid, Federal Government will borrow and borrow to finance the budget, the deficit will grow wider and the private sector will be crowded out of access to credit.
The scary thing is that rising U.S. shale oil output has already started re-routing flows of Nigerian 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. 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.
Nigeria’s Federal Government functionaries, governors and legislators who have been feeding fat on the proceeds of crude sales should be ready to drink the crude when it returns unsold.

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Oil

FG Introduces New Incentives To Revitalize Nigeria’s Oil & Gas Industry

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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.

 

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Tinubu set to approve ExxonMobil-Seplat oil deal, expands CNG bus initiative

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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.

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ExxonMobil To Invest $10bn In Nigeria’s Deep-Water Oil Operations

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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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