Stranded cargo shows credit challenges at Dangote refinery in Nigeria

Chinese state energy major PetroChina has been waiting to unload a cargo of U.S. crude at Nigeria's giant new refinery for nearly a month due to payment issues, according to four trading sources and shipping data.

The impasse highlights difficulties the $20 billion plant funded by Africa's richest man Aliko Dangote faces in its aim to be the biggest refinery on the continent and in Europe when it reaches full capacity this or next year.

Dangote aims to reverse the trend by which the oil-rich country exports its crude but almost totally relies on imports of fuel and other refined products.

The 2-million-barrel West Texas Intermediate (WTI) crude cargo shipped by PetroChina onboard supertanker Maran Mira has, however, been floating off Nigeria since March 28, shipping data on LSEG and Kpler showed.

The completion of the oil sale from PetroChina to Dangote has been delayed as the refinery has yet to issue a letter of credit to the Chinese trader, one source familiar with the matter said.

A letter of credit is the most common form of trade finance. A buyer's bank sends a letter to the seller's bank guaranteeing payment to the seller once goods arrive.

PetroChina was also not keen to receive oil products as payment, one of the ways that Dangote has been paying for its crude, the source said.

Two of the sources also told Reuters that the refinery has had difficulty accessing dollars through the Nigerian government, with the naira's slide against the U.S. dollar as global oil prices have risen straining Nigeria's finances.

The government did not immediately respond to a request for comment and a Dangote executive did not directly address the issue in comments to Reuters.

PetroChina has another 2 million barrels of WTI crude onboard supertanker Kondor that is making its way to Nigeria, according to another source and LSEG shiptracking data.

Potential sellers of U.S. WTI crude to Dangote have been confronted with difficult payment terms: either a 60 to 90 credit or an exchange of refined products for the crude oil, three of the sources said. Credit terms for oil deals are typically 30 days.

PetroChina did not respond to a Reuters request for comment.

A shipbroker estimated that the ship is incurring demurrage costs of around $65,000 a day.

Dangote group executive Edwin Devakumar told Reuters that seeking favourable sale prices and credit terms were normal business practices.

"If someone gives me one year credit, I'll grab it and if not, I'll negotiate the best possible deal," he said. "When you go to a shop to buy something ... You'll try the best possible deal and I do the same".

"We are not delayed. If someone's business is delayed, he is not giving us a good deal," Devakumar said, without specifically addressing the issue with PetroChina.

RAMPING UP

The refinery started operations in January and has reached half its capacity in recent weeks but a further increase is being slowed by its need to borrow billions of dollars in working capital to be able to buy large volumes of crude, trading sources said.

Devakumar declined to comment on the current run rates at the refinery.

The facility is importing around 10 crude oil cargoes a month, two traders said, roughly half the capacity of 650,000 barrels per day (bpd) it seeks to reach this year or next, which would make it the largest refinery in Africa and Europe.

The amount of Nigerian and U.S. crude discharged at Dangote totalled 8.4 million barrels in March and 5.4 million barrels so far in April, Kpler data showed. Another 1 million barrels of Nigerian crude is expected to arrive on April 27.

Trafigura, Mercuria, Vitol, Shell and NNPC were among Dangote's suppliers of crude last month, according to Kpler. 

By Florence Tan, Reuters 

Related stories: Video - Nigeria government directs crude oil be sold to domestic refineries first

Dangote refinery supplies petroleum products to local market in Nigeria

Video - Nigeria government directs crude oil be sold to domestic refineries first

Nigerian authorities introduced new regulations to enable domestic refineries to pay for crude supply from oil producers in the country in the local currency. The government also introduced a new directive requiring producers to first sell crude oil to local refineries. The actions will hopefully reduce Nigeria's dependence on imported petrol products.

CGTN

Related stories: Analysts skeptical about improvement of local crude refining in Nigeria

Dangote refinery supplies petroleum products to local market in Nigeria

 

 

Analysts skeptical about improvement of local crude refining in Nigeria

Nigeria has been Africa’s largest or second-largest oil exporter for years, but relies heavily on imports to meet local energy needs. The government is trying to change that, saying the country’s four moribund oil refineries will be revived and put back in operation.

This week, authorities also announced a new policy that oil producers must sell a share of their crude oil to local refiners before they are permitted to export crude.

Nigeria’s petroleum regulatory commission announced the new Domestic Crude Oil Supply Obligation (DCSO) during a meeting with industry players. It's part of an amendment to Nigeria’s Petroleum Industry Act of 2021.

Under the policy, Nigerian oil producers are allowed to export crude only after meeting their supply obligations to local refiners.

The measure will take effect in the second half of the year, but it does not specify what quantity of crude must be supplied to local refineries.

Authorities said the objectives of the guideline are to bolster Nigeria’s refining capacity, improve the oil industry and earn foreign exchange.

Public affairs analyst Jaye Gaskiya said it was the right move. "In the current situation globally, this is actually going to turn out much more beneficial to both the producers and refiners in the country," Gaskiya said. "Essentially this is designed to ease the problem of supply to the local refineries so that they don't become redundant. The second thing is that it is also designed in such a manner to ease the pressure on the naira," which is the currency of Nigeria.

According to the regulations, payments for crude to domestic refiners can be made in dollars, naira or a combination of both.

Nigeria relies heavily on imports to meet the population’s energy needs. Analysts say refining crude oil locally could reverse this trend.

But oil and gas analyst Toyin Akinosho said he had concerns.

"In principle, I do not have a problem with it, but we need to be very careful about the foreign exchange implications and also the volumes that are going out," he said. "My challenge has always been, if you are overzealous about certain regulations, you can burn your fingers. In an era of very low forex [currency trading] and this being the major avenue for inflow into the country, you have to find a way of managing it."

The new measure includes penalties for oil producers who divert crude oil or refiners who fail to meet payment obligations.

But Gaskiya said there were some loose strings to the rule.

"The regulation says it is on the basis of willing buyer and willing seller, and that's quite tricky," Gaskiya said. "A situation where you have the suppliers, for instance, being unwilling, what are you then going to do as the regulator? So those are the things that the regulator needs to be on the lookout for."

The refineries in Nigeria, including the latest one built by Africa's richest man, Aliko Dangote, will have a combined processing capacity of 650,000 barrels of crude oil per day when rehabilitated.

While experts have doubts the new guidelines will be effective, authorities are optimistic Nigeria is getting closer to its goal of having a self-sufficient energy sector.

By Timothy Obiezu, VOA 

Related story: Dangote refinery supplies petroleum products to local market in Nigeria

Libya overtakes Nigeria as Africa's largest oil producer

Nigeria strikes deal with Shell to supply $3.8 bln methanol project

Nigeria has struck a deal for Shell to supply gas to its proposed $3.8 billion Brass methanol facility, resolving a major hurdle to a final investment decision on the project, the minister of state for gas said on Thursday.

Nigeria, which holds Africa's largest natural gas reserves of more than 200 trillion cubic feet, has struggled to tap the commodity due to capital constraints and a lack of infrastructure.

Minister Ekperikpe Ekpo said in a statement that the Gas Supply and Purchase Agreement, crucial for the Brass methanol project, will be executed next month following successful talks with Shell's Nigeria CEO and executives from other companies involved.

The GSPA will secure a long-term gas supply from a Shell-operated joint venture for the methanol production facility that will be built on Brass Island in the oil-rich coastal Bayelsa state.

"The NNPC/Shell joint venture partners are now fully committed to uninterrupted gas supply for the development of the Brass Methanol project," Ekpo said.

"Mr President is very passionate about this project and wants something positive to happen in respect of the Brass Methanol project before the end of May this year," Ekpo said.

The project includes a gas processing plant, a methanol production and refining site, and product export facilities.

By Camillus Eboh, Reuters

Related story: Amnesty International says Nigeria must stop Shell Niger Delta business sale

 

Amnesty International says Nigeria must stop Shell Niger Delta business sale

More than 40 civil society organisations call for proposed sale to be blocked as it risks worsening human rights abuses

Deal appears to fall far short of several regulatory and legal requirements

There have been hundreds of oil spills from Shell infrastructure in the Niger Delta during its decades of operation

‘There’s a substantial risk Shell will walk away with billions of dollars, leaving those already harmed facing continued abuse’ - Isa Sanusi

The proposed sale of Shell’s onshore oil business in the Niger Delta region of southern Nigeria risks worsening human rights abuses and should be blocked by the Government unless a series of safeguards are put in place, a group of 40 civil society organisations including Amnesty International said today.

In an open letter to the Nigerian industry regulator, the signatories said the sale of Shell Petroleum Development Company to Renaissance Africa Energy should not be allowed to proceed unless the environmental pollution it caused has been fully assessed, it provides sufficient funds to guarantee clean-up costs, and local communities have been fully consulted.

The letter highlights how the deal appears to fall far short of several regulatory and legal requirements including the apparent lack of an environmental study to assess clean-up requirements, and an evaluation to ensure sufficient funds are set aside for potential decommissioning of oil infrastructure - a sum likely to amount to several billions of US dollars.

It also notes the lack of an inventory of the physical assets being sold, which potentially indicates the state of disrepair of pipelines and infrastructure that caused leaks which have frequently had devastating consequences on local people’s health and wellbeing.

Isa Sanusi, Amnesty International’s Nigeria Director, said:

​“There is now a substantial risk Shell will walk away with billions of dollars from the sale of this business, leaving those already harmed without remedy and facing continued abuse and harms to their health.

​“Guarantees and financial safeguards must be in place to immediately remedy existing contamination and to protect people from future harms before this sale should be allowed to proceed.

​“Shell must not be permitted to slip away from its responsibilities for cleaning up and remedying its widespread legacy of pollution in the area.”

​Olanrewaju Suraju, chairman of Human and Environmental Development Agenda , commented:

“Shell’s operations in the Niger Delta over many decades have come at the cost of grievous human rights abuses of the people living there. Frequent oil leaks from its infrastructure and inadequate maintenance and clean-up practices have left groundwater and drinking water sources contaminated, poisoned agricultural land and fisheries, and severely damaged the health and livelihoods of inhabitants.”

Hundreds of oil spills

There have been hundreds of oil spills from Shell infrastructure during the decades it has been operating in Nigeria.

​Renaissance Africa Energy is a consortium consisting of ND Western Limited, Aradel Holdings Plc, FIRST Exploration and Petroleum Development Company Limited, the Waltersmith Group and the Petrolin Group.

The letter with a full list of signatories is available here. 

Amnesty International

Related story: Video - Challenges arise as Shell plans exit from Nigeria

Libya overtakes Nigeria as Africa's largest oil producer

Libya overtook Nigeria as the top African crude oil producer for March, data from the Organization of Petroleum Exporting Countries (OPEC) has shown. According to the April 2024 Monthly Oil Market Report (MOMR), Libya recorded 1.236 million barrels per day (bpd) of crude production in March, up from 1.173 million bpd in February.

Meanwhile, Nigeria recorded an output of 1.23 million barrels per day in March 2024, compared to 1.32 bpd in February 2024. Despite the drop in output by 6.8 per cent, Nigeria retained its leadership position on the continent, producing 1.398 million bpd, while Libya produced 1.161 million bpd during the period.

“According to secondary sources, total OPEC-12 crude oil production averaged 26.60 mb/d in March 2024, 3 tb/d higher, m-o-m. Crude oil output increased mainly in IR Iran, Saudi Arabia, Gabon, and Kuwait, while production in Nigeria, Iraq, and Venezuela decreased.”

According to direct communications from OPEC, the recent drop in the country’s crude production can be attributed to a surge in pipeline vandalism and crude oil theft incidents in its oil-producing region.

Experts weighed in, saying that this has led to a decline in business activity and subdued consumer spending, high input-cost inflation, and lower employment levels compared with the previous year.

In other news, the Dangote oil refinery in Nigeria has started supplying petroleum products to the local market, a major step in the country's journey towards energy self-sufficiency. Devakumar Edwin, an executive at Dangote Group, confirmed the arrival of diesel and jet fuel shipments in the local market.

Abubakar Maigandi, head of the Independent Petroleum Marketers Association of Nigeria, also said that local oil marketers reached an agreement on the price of diesel at 1,225 naira ($0.96) per litre following a bulk purchase deal. Maigandi noted that the association's members oversee about 150,000 retail stations throughout Nigeria. 

By Victor Oluwole, Business Insider Africa

Related story: NNPC faces $3 billion backlog on petrol payments

NNPC faces $3 billion backlog on petrol payments

Nigeria's state-oil company NNPC owes around $3 billion to fuel traders for imported petrol, three sources told Reuters, as the tumbling naira currency and rising global fuel prices have increased the effective subsidy it is paying.

The payment backlog is a blow to the government's efforts in Africa's largest economy to shore up its strained finances by curbing costly energy subsidies.

"They are paying, but it's slow," one of the sources with knowledge of the matter said. Five sources said that NNPC - the country's main importer of petrol - was taking more than 130 days to make the payments instead of within 90 days.

An NNPC spokesperson said the company was "not aware of any such debt nor any financial issues of such magnitude".

"Our focus remains on sustaining sufficiency in the supply of petroleum products in Nigeria," the spokesperson said.

NNPC's suppliers, including international traders like Vitol, Mercuria and Gunvor as well as Nigeria-based trading houses, are still supplying fuel, the sources said. They declined to be named because they are not authorised to speak to the media. The trading firms declined to comment.

But the payment delays underscore the creeping return of fuel subsidies - scrapped in May 2023 - that sap NNPC's cash for imports and what it can send to President Bola Tinubu's government.

Nigeria had subsidised fuel for years to keep pump prices affordable, but Tinubu removed them as part of wider reforms, allowing prices to triple. Petrol consumption fell by around 30% as higher prices curbed smuggling to neighbouring countries.

In June, the government capped pump prices at a nationwide average of 617 naira per litre as Nigerians grappled with punishing inflation.

"It's hard to overstate the significance of fuel subsidies for the administration," said Clementine Wallop, director for sub-Saharan Africa at political risk consultancy Horizon Engage.

"It was subsidy removal and exchange rate reform that had investors and lenders initially positive about his administration, and it was their removal Tinubu hoped would give his team the ability to spend in the many other areas that need funding."

Nigeria is almost wholly reliant on fuel imports due to years of mismanagement and under-investment at state-owned oil refineries.

QUEUES AND BACKLOG OF BILLS

Last week, motorists queued for petrol across Nigeria's commercial capital Lagos, due to a shortage of fuel from depots. Clement Isong, head of the Major Oil Marketers Association (MOMAN), said logistical issues over Easter caused the constraints, which would soon abate.

Oil industry sources said rising global gasoline prices and a weaker naira had also impacted NNPC's ability to import.

At their peak in February, market prices for petrol in West Africa were 1,229 naira per litre, 150% above the level the government capped prices in June, according to pricing data from Argus Media converted with tracking site Aboxifx naira rates. They have since fallen to around 912 naira per litre, still 295 naira above the capped price.

That left NNPC as the sole importer of the roughly 40 million litres per day the country consumes, as private importers cannot recoup their costs.

Since the naira has slid against the dollar and oil prices have risen, NNPC is losing money on every litre sold, traders said.

The International Monetary Fund recently warned that capping pump prices and electricity tariffs below cost recovery could shave up to 3% off GDP in 2024.

"The government still needs to begin formulating a plan to remove the fuel subsidy when conditions allow," Tellimer's Patrick Curran said in a note. 

By Libby George and Julia Payne, Reuters

Dangote refinery supplies petroleum products to local market in Nigeria

Nigeria's Dangote oil refinery started supplying petroleum products to the local market on Tuesday, a company executive and fuel marketing associations said, a major step in the country's quest for energy independence.

The refinery, Africa's largest, was built on a peninsula on the outskirts of the commercial capital Lagos at a cost of $20 billion by the continent's richest man Aliko Dangote and was completed after several years of delays.

It can refine up to 650,000 barrels per day (bpd) and will be the largest in Africa and Europe when it reaches full capacity this or next year.

Dangote's group executive, Devakumar Edwin, confirmed shipping of diesel and jet fuel into the local market.

"We have substantial quantities. Products are being evacuated both by sea and road. Ships are lining up one after another to load diesel and aviation jet fuel," Edwin told Reuters.

"Ships load a minimum of 26 million litres, though we try to push for 37 million litres vessels, for ease of operations."

Local oil marketers agreed a price of 1,225 naira ($0.96) per litre of diesel following a bulk purchase agreement, before putting their mark-up, said Abubakar Maigandi, head of the Independent Petroleum Marketers Association of Nigeria.

The association's members control about 150,000 retail stations across Nigeria, Maigandi said.
Another marketers' group, the Depots and Petroleum Products Marketers Association of Nigeria said its members were seeking letters of credit to buy petroleum products from Dangote.

"Our members are discussing with banks and these talks have reached advanced stages, when we have our letters of credit, we will begin lifting products," Femi Adewole, the association's executive secretary said.

The Dangote refinery is touted as the turning point to end Nigeria's reliance on imported petroleum products. Nigeria is Africa's most populous nation and its top oil producer, yet it imports almost all its fuel due to lack of refining capacity. 

By Isaac Anyaogu, Reuters 

Related story: Video - Dangote refinery in Nigeria to import crude from U.S.

 

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The Nigeria-Morocco Gas Pipeline spans 5,600 kilometres and will likely shape Africa's energy landscape. Officials hope the pipeline will also become a major gas supplier to Europe.

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Related story: Possible Trans Niger oil pipeline leak investigated by Shell Nigeria

 

 

 

Video - Dangote refinery in Nigeria to import crude from U.S.

The announcement comes as the Dangote refinery intensifies moves to start pumping out refined products. The facility is targeting an initial processing rate of 350,000 barrels a day before ramping up toward its full capacity.

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 Related stories: Dangote wants to set up trading arm for Lagos mega refinery

Dangote oil refinery to help solve fuel shortage in Nigeria

 

 

Video - Challenges arise as Shell plans exit from Nigeria

Shell oil faces obstacles in its planned exit from Nigeria. Environmental activists accuse Shell of trying to avoid responsibility for decades of oil spills in Nigeria's Niger Delta region. The activists want Shell to clean up the region and decommission its oil infrastructure before leaving the country.

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Related stories: Advocacy Groups Call for Halt to Shell's Planned Exit from Nigeria

Activists urge Nigeria to delay Shell’s $2.4 billion sale of assets in deeply polluted Niger Delta

Video - Nigerian oil spills agency investigates pipeline leak in Niger Delta

 

 

Dangote wants to set up trading arm for Lagos mega refinery

Africa's richest man Aliko Dangote is planning to set up an oil trading arm, likely based in London, to help run crude and products supply for his new refinery in Nigeria, six sources familiar with the matter said.

The move would reduce the role of the world's biggest trading firms, which have been negotiating for months to provide the refinery with financing and crude oil in exchange for products exports. The giant 650,000 barrel-per-day refinery is set to redraw global oil and fuel flows and the trading community is closely watching the way it will operate.

Dangote, whose wealth is estimated by Forbes at $12.7 billion, did not reply to several comment requests.
BP, Trafigura and Vitol among others have met Dangote in Lagos and London in recent weeks to offer loans for the some $3 billion in working capital the refinery needs to buy large amounts of crude, trading sources told Reuters.

The traders asked the refinery to repay loans with fuel exports but so far they have signed no deals as Dangote worries they would reduce his control of the project – and potentially his profit, the sources said. Dangote has also met state-backed firms in his search for cash and crude.

"He is going to try and do it himself," an industry source told Reuters. Sources told Reuters the new trading team will be led by ex-Essar trader Radha Mohan. He joined Dangote in 2021 as director of international supply and trading, according to his Linkedin profile. Two sources said the team was in the process of hiring two new traders.

The refinery took nearly a decade to complete -- and came in at a cost of $20 billion, some $6 billion over budget.

The plant has refined around 8 million barrels of oil between January and February and will take months to get to full capacity. So far, Vitol has prepaid for some product cargoes to help the refinery buy crude, while Trafigura has swapped some crude oil in exchange for future fuel cargoes, sources with knowledge said. Geneva-based Vitol and Trafigura declined to comment. 

By Julia Payne and Libby George, Reuters 

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Dangote oil refinery to help solve fuel shortage in Nigeria

Advocacy Groups Call for Halt to Shell's Planned Exit from Nigeria

Advocacy groups are calling on the Dutch oil giant Shell to halt its plans to divest assets from Nigeria's Niger Delta region unless proper cleanup and decommissioning of its infrastructure is complete.

This week, a Netherlands-based nonprofit released a report accusing Shell of trying to avoid responsibility for oil spills. The Center for Research on Multinational Corporations' report, entitled "Selling Out Nigeria — Shell's Irresponsible Divestment," said the Dutch oil giant's divestment in Nigeria must be suspended until clean-up and decommissioning of assets are complete.

The group accused Shell of trying to avoid responsibility for decades of oil spills in Nigeria's Niger Delta region that have polluted bodies of water and farmlands. It said Shell's assertion that it cleaned up polluted oil spill sites is flawed and cannot be trusted.

Faith Nwadishi, founder of Center for Transparency Advocacy, agrees with the report.

"The contract that they have signed that talks about the issue of remediation, protection of the environment and all of those things have not been done," said Nwadishi. "We should be looking at the contract and interpreting it accordingly — this is international best practice. This is what happens everywhere."

Shell operations grew controversial

Shell pioneered Nigeria's oil and gas explorations in 1937, but its operations have been subject to controversy and lawsuits from local communities.

Shell often blamed sabotage and vandalism by locals for busted pipelines, oil spills and environmental pollution.

In January, the company announced plans to sell its onshore operations to a local consortium of five companies for $2.4 billion.

Shell said the move would allow it to focus on more lucrative offshore businesses and that it was also proof that local companies are able to take on a larger share of Nigeria's oil and gas industry.

But Nwadishi said if the pollution issue is not addressed, Shell's exit could set a bad example for other multinationals operating in Nigeria.

"Once one person sets a precedent — especially the bad precedences — once they're set, you see other people following up," said Nwadishi. "When they do that, what it will mean is that they set a wrong template for other multinationals to do the same thing. And unfortunately, we have this judicial system that takes forever to take care of issues like that."

Law mandates funding for cleanup

Under Nigerian law, Shell is expected to provide funding for cleanup and decommissioning of its infrastructure before exiting.

But the report says the implementation of the law is flawed and said there is no sign that Shell is trying to comply with the law.

The company has not commented on the report but recently released a list of eight cleanup operations it plans to carry out in Nigeria this year, all for spills of less than 100 barrels of oil.

Emmanuel Afimia, founder of Enermics Consulting, said Nigerian authorities must take the Shell divestment plan seriously.

"Nigeria should implement the following measures: establish a robust regulatory framework that holds multinational corporations accountable for the environmental damage caused by their operations; ensure that affected communities are consulted and involved in the cleanup process and that their concerns and needs are addressed," said Afimia. "We need to monitor and evaluate the cleanup process regularly to ensure that it is being done properly and transparently."

VOA asked Nigeria's National Oil Spill Detection and Response Agency for comment on the Shell issue but has not received a response.

Before Shell can sell the assets in question, it must get approval from the Nigerian government. The government has not said whether it will authorize the sale.

By Timothy Obiezu, VOA

Related story: Activists urge Nigeria to delay Shell’s $2.4 billion sale of assets in deeply polluted Niger Delta

Activists urge Nigeria to delay Shell’s $2.4 billion sale of assets in deeply polluted Niger Delta

Local activists and international environmental groups want Nigeria’s government to delay approving the sale of oil company Shell’s onshore assets, claiming Shell is trying to shirk its environmental and social responsibilities in the highly polluted Niger Delta.

The London-based company is trying to sell its subsidiary Shell Petroleum Development Company — which operates its onshore assets in the delta — to Renaissance Africa Energy Company, a consortium of local companies. Shell says the $2.4 billion divestment deal is part of a “wider reconfiguration of the Nigerian oil and gas sector.”

But the Centre for Research on Multinational Corporations (SOMO), a Dutch non-profit, released a report Wednesday saying Shell shouldn’t be allowed to divest in the delta unless it takes “responsibility for its toxic legacy of pollution and ensures the safe decommissioning of abandoned oil infrastructure.”

Protesters have appealed to the government of Nigeria, Africa’s top oil producer, to halt the sale until environmental concerns are addressed. Lezina Mgbar, a 54-year-old healthcare worker and farmer who participated in a weekend demonstration in the country’s oil capital of Port Harcourt, said her Korokoro Tai community in Ogoniland has been “severely” affected by oil spills.

“In the morning, children and women have to travel far to get water, so children often cannot get to school on time, and our farm yields are poor,” Mgbar told The Associated Press. “We demand that Shell restore our land and clean our water before any divestment.”

Scientific studies have found high levels of chemical compounds from crude oil, as well as heavy metals, in the delta, where the industry largely drives Nigeria’s economy but can leave communities’ water sources slick with contaminants.

Activists say Shell has a history of poor divestment in the region. They point to a wellhead blowout in the Santa Barbara River, which flows through the Niger Delta, in 2021. The wellhead wasn’t producing but wasn’t decommissioned by Shell or its new owners, Aiteo Eastern E & P. The facility spewed crude oil and associated gas for 38 days and caused planet-warming methane to be released into the atmosphere, killed fish and devastated riverside farms.

Richard Steiner, an environmental consultant with a history of work in the Niger Delta, said the blowout on the Santa Barbara River highlights the risk of Shell and other oil majors transferring assets to new local firms without resolving legacy environmental and social concerns first.

“Many of the purchasing companies do not have the technical or financial capacity to manage these oil and gas operations safely,” he said.

Shell says it assesses the financial strength, culture and social and environmental performance records of companies it sells assets to. A spokesperson added that “mandatory submissions to the federal government allow the regulators to apply scrutiny across a wide range of issues and recommend approval of these divestments, provided they meet all requirements.”

Nigerian President Bola Tinubu, who holds the portfolio of petroleum minister, will ultimately decide the fate of the Shell-Renaissance transaction. His spokesperson did not comment when contacted on Monday.

SOMO’s report documents other cases of environmental pollution that were allegedly not addressed by Shell before past divestments. Two communities, Ogale and Bille in Rivers State, have been in court pushing to make the company address past environmental concerns.

Shell and other oil companies often blame third-party interference, namely militant attacks and vandalism by oil thieves, for spills. However, companies still must clean up regardless of the cause, according to Nigeria’s law.

The deal with Renaissance is the latest move by Shell to limit its onshore operations in Nigeria while focusing on deepwater operations. Other companies, including Chevron, ExxonMobil and TotalEnergies, have been taking similar steps but without the scale of protests Shell, which is the most dominant in the region, has faced.

The civil society coalition that helped organize protests aimed at delaying the sale have petitioned Tinubu to adopt a set of principles to ensure more responsible petroleum industry divestments.

That “would help ensure a transparent process that would assess the capacity of the incoming companies, with meaningful community consultation throughout, address environmental pollution and deteriorating and abandoned infrastructure,” said Florence Kayemba, director of the Niger Delta-focused Stakeholder Democracy Network, one of the groups that came up with the principles.

Unlike in previous sales, Shell is transferring all its subsidiary shares to Renaissance, resulting in a change of ownership that would see SPDC continue to carry liabilities. Shell has said SPDC, with new ownership, will continue with the current staff and be responsible for remediation where spills have occurred in the past.

SOMO’s report noted the arrangement but said the energy giant is still trying to avoid its responsibility.

Audrey Gaughran, SOMO’s director, told the AP in a statement that “ensuring that the historical pollution, the lack of funding for safe decommissioning and poor financial transparency are fully addressed in Nigeria will be an important litmus test for a just energy transition across the world.” 

By Taiwo Adebayo, AP

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Related story: Shell successfully conducts first remotely controlled well completion offshore Nigeria

 

Shell successfully conducts first remotely controlled well completion offshore Nigeria

Shell Nigeria Exploration and Production Company (SNEPCo) has successfully completed the first remotely controlled well completion operation offshore Nigeria.

The operation was performed at the Bonga field, in 1,060 m water depth. The well completion operation was performed utilizing a Remotely Operated Controls System (ROCS) that has been supplied by Norwegian technology company Optime Subsea.

Optime Subsea's ROCS eliminates the need for both the umbilical, which traditionally connects the surface to the seabed for controlling the tubing hanger in subsea well completions, and the topside hydraulic control unit. This innovation not only cuts costs but also significantly reduces the amount of deck space required for these operations.

“We are very pleased with the performance of the ROCS. It means that we can perform well completion operations quicker, at lower cost, and with substantially lower CO2-footprint compared to conventional systems,” says Justus Ngerebara. Lead Well Engineer at SNEPCo.

Last year, SNEPCo took delivery of its first ROCS from Optime Subsea and have worked closely with Optime Subsea to integrate the system into its operations.

Using a ROCS means that operators can cut approximately 50 tonnes of equipment from their offshore transportation list, which means substantially lower CO2-footprint. It also means reduced operating time and less HSE exposure on the drill floor. In total, it reduces both CAPEX and OPEX for operators.

Optime Subsea has performed multiple ROCS operations in the North Sea and Gulf of Mexico, but this was the first in African waters. The operation was led by Optime Subsea’s operation in Nigeria, supported by personnel from the company’s headquarter in Norway.

“To be able to free up valuable deck space immediately after the operation, through shipping the ROCS to shore, is a significant advantage for the rig operator. We are delighted to bring this technology to Nigeria and very grateful for SNEPCo’s innovative and ambitious approach to subsea well completion operations,” says Rodger Hooker, Chief Service Officer at Optime Subsea.

Optime Subsea has offices in Notodden, Norway; Houston, Texas; and Lagos, Nigeria. Over the past decade, the company has established itself as a leading specialist on subsea intervention and controls systems globally.

ROCS details. When completing subsea wells, the tubing hanger is placed on top of the wellhead, as a seal towards the rest of the subsea well.

Normally the tubing hanger is controlled through a dedicated hydraulic umbilical which adds a large 20-30 ft control container. When running the umbilical, it is also clamped to the tubing for increased stability.

ROCS replaces these operations by remotely controlling a controls unit toward the wellhead. This allows for safer, simpler and more efficient operations.

ROCS is mobilized in a single basket, prepared and made up onshore, allowing it to be ready to run immediately when offshore, from a rig. Avoiding mobilization of 50 ton + of topside equipment

The ROCS is 100% universal and can be applied to any type of subsea well.

World Oil

Video - Drop in oil production leaves government budget of Nigeria under stress

Despite missing OPEC's 1.5 million barrels per day target, Nigeria set ambitious sights in 2024, eyeing a daily production target of 1.7 million barrels. But the year is off to a rocky start. January 2024 oil production fell to 1.42 million barrels per day, a drop of 3,000 barrels per day from the previous month. Experts worry that the consequences could be dire.

CGTN

Related story: NNPC has no plans to raise petrol prices after devaluation

 

New Dangote refinery in Nigeria to export first fuel cargoes

Nigeria's Dangote oil refinery has issued tenders to sell two fuel cargoes for export, the first from the newly commissioned refinery, trading sources with knowledge of the matter told Reuters.

The refinery, Africa's largest with a nameplate capacity of 650,000 barrels per day, was built on a peninsula on the outskirts of the commercial capital Lagos by the continent's richest man Aliko Dangote.

Nigeria has for years relied on expensive imports for nearly all the fuel it consumes but the $20 billion refinery is set to turn it into a net exporter of fuel to other West African countries, in a huge potential shift of power and profit dynamics in the industry. Dangote declined a Reuters request for comment.

The first cargo is 65,000 metric tons of low-sulphur straight run fuel oil, which Dangote has awarded to Trafigura and is due to load at the end of February, three of the sources said. Trafigura declined to comment.

At least one refiner said they had been offered the cargo by Trafigura without elaborating further.
The second tender is for about 60,000 tons of naphtha, three other sources said. Two of them added that the tender closes on Feb. 15. Loading details were not immediately available.

Sources told Reuters last week that the refinery was preparing to deliver its first fuel cargoes to the domestic market within weeks.

The two fuels on offer are typical products of running light sweet crude through a crude distillation unit (CDU) in a refinery without further upgrading capacity. It is expected to take months for upgrading units to be brought online, experts have said.

The refiner began buying crude in December last year and Nigeria's state-owned oil firm NNPC Ltd has been the main supplier. Dangote has also purchased some U.S. oil and is expected to receive 2 million barrels of U.S. WTI Midland in early March, according to LSEG and Kpler ship tracking.

By Ahmad Ghaddar, Reuters 

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Nigeria to propose naira payment for local gas sale

Nigeria is proposing for gas producers to sell gas to local power plants in naira to solve problems of dollar shortages after a second currency devaluation in less than a year is expected to balloon costs and make it hard for firms to pay.

Nigeria has 24 gas power plants with a combined output capacity of 11,434 megawatts, but it only delivers around a third of its capacity to the grid due to issues with gas supply.

"Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy's needs and promoting sustainable energy production," Power Minister Adebayo Adelabu said in a post on X.

Adelabu added that he plans to create legislative measures that will mandate naira payments for domestic gas supply.

Natural gas is sold in dollars to power plants because investments tied to building gas plants and pipelines are priced and paid for in dollars.

However, local operators have had difficulties making dollar payments since a currency crisis which has seen the naira lose significant value. The currency weakness is expected to force the price of gas in the domestic market sharply higher.

Nigeria has proven gas reserves of 206 trillion cubic feet which it has struggled to tap due to capital constraints. The government hopes it can fix the challenges by switching to naira payments and capping dollar prices.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the local gas regulator, has asked producers to keep gas prices at $2.18 per million British Thermal Units (MMBtu) as per agreement with unions three-years ago. 

By Isaac Anyaogu, Reuters

Related stories: No More Dollars: Banks in Nigeria to Pay Customers' Money from Abroad in Naira

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NNPC has no plans to raise petrol prices after devaluation

Nigerian state-oil company NNPC said on Thursday it has no plans to raise petrol prices after a second devaluation of the local naira currency in less than a year, following speculation that it could increase prices to recover some of its import costs.

The official naira exchange rate last week plunged to as low as 1,531 per dollar from 900, well below black market levels, after the market regulator changed its closing rate calculation methodology, in a de facto devaluation.

The official rate had been drifting towards parallel market levels as forex shortages funnelled demand to unofficial sources.

The Nigerian National Petroleum Corporation (NNPC), -- the sole importer of petrol because local private firms are unable to obtain foreign currency -- urged Nigerians to disregard the speculation about price rises, adding that "there are no plans for an upward review of the (petrol) price."

Petrol prices have not budged since last July when President Bola Tinubu scrapped a popular but costly fuel subsidy and lifted restrictions on currency trading which more than tripled petrol prices.

This was a move the president hoped would revive sluggish economic growth, but the reforms pushed inflation to a nearly three-decade high in December, worsening a cost of living crisis.

Tinubu has been under pressure from unions to offer relief to households and small businesses after he scrapped the subsidy that kept petrol prices low but cost the government $10 billion in 2022.

The president has said he was aware of the hardship caused by removing the subsidy and was monitoring the effects of the exchange rate and inflation on gasoline prices, adding that he would intervene if and when necessary.

Nigeria's main unions on Thursday gave a two-week ultimatum to the government to meet demands ranging from a wage increase to improved access to public utilities among others, and said it regretted government's failure to uphold pledges to cushion the effects of reforms. 

By Camillus Eboh, Reuters