Oil
Oil-Shipping Routes Lengthen
LONDON – A tectonic shift under way in the global oil trade is increasing the average distance traveled by a typical barrel of oil. This is likely to push shipping rates higher and benefit shipping companies as well as shipbuilders.
The U.S. energy boom is largely responsible for the shift, as sharply higher domestic production of oil and gas is moving the country off its perch as the world’s largest oil importer even as Asian appetites for hydrocarbons continue to rise—a good thing for traditional U.S. suppliers, including Latin America and West Africa, who are finding ready customers (much) farther away.
For consumers, longer voyages mean increased fuel costs and freight rates, as the availability of shipping vessels diminishes in line with the increased time tankers are booked to cover extended distances.A team of analysts from DNB Bank found the average sailing distance for the crude tanker of choice—the very large crude carrier, or VLCC, which measures around three football fields in length and can carry around 2.1 million barrels—reached around 7,500 nautical miles in 2013. That is roughly a third of the distance around the globe, and it is up 9% since 2010.
“[I]t’s nearly three times longer from West Africa to China than to the U.S.,” DNB analyst Petter Haugensaid told The Wall Street Journal, citing the shift in traffic from West Africa as the biggest contributor to the rising average distance.
This is consistent with the tilting of the center of global oil consumption toward the East in what the International Energy Agency has called “a fundamental reordering of global oil trade over the coming decades.” China has already supplanted the U.S. as the world’s biggest oil importer on a monthly basis, and the U.S. Energy Information administration projected in a recent report that China will be the No. 1 net importer for the full year in 2014 with an average of 6.6 million barrels of day versus 5.5 million barrels a day for the U.S.The IEA, a Paris-based energy watchdog representing oil-consuming countries, has estimated that the U.S.’s share of the overall global trade will decline from 27% currently to 15% in 2035, by which time it projects the global tanker trade will have increased by around 18% as average shipping distances lengthen.
Robert Willmington, operations manager at IHS Maritime, a ship-tracking service, said the trend will be very consequential for the shipping industry, as it will increase freight rates and spur more build orders for VLCCs.
Shipbuilders have already increased their rates for the large tankers by around 10% over the past six months, in line with a surge in orders, Mr. Willmington said. Better freight rates will also help charterers and operators recover from a downturn in the wider shipping industry that has been in the doldrums since 2008.
An examination of import trends for two of Asia’s largest oil consumers, China and India, highlights the changing trade patterns. China’s crude imports from its largest oil suppliers, including Saudi Arabia and Kuwait stagnated or declined in 2013, while imports from parts of West Africa, including the Republic of Congo, surged 32%, official data show.Similarly, India has diversified its oil sources, as it increasingly looks toward distant Latin America, which according to energy consulting firm JBC Energy, increased its share in the South Asian country’s imports to 20% last year from 10% two years earlier. This makes the region the second-largest oil supplier to India after the Middle East. Chinese imports of Latin American crude in the first nine months of 2013 rose 14% compared with the same period in 2011, JBC data show.
“Faced with the loss of their historical export market on the back of the U.S. shale boom, Latin American producers have increasingly set their sights on Asia as an outlet for their production and met a ready market,” JBC said.
India is raising Latin American crude imports even further this year, with supplies flowing in from Mexico, Columbia and Argentina—countries that hadn’t exported barrels to India on a large scale before last month.
The country is also taking shipments from other parts of America. Indian Oil Corp., for example, was India’s first-ever recipient of Canadian crude oil late last year.
– WALLSTREET JOURNAL
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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