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Saturday, April 20, 2024

Of OPEC’s Chairmanship, Oil Theft And MT Patience – By Erasmus Ikhide

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THE Organisation of Petroleum Exporting Countries, OPEC announces her
demise for electing Diezani Alison-Madueke, the Nigeria’s Minister of
Petroleum Resources as its Chairman. The nation’s racy oil empress who
was rewarded, ostensibly for her flashing flamboyance and daunting
credential of corruption and tendentious failure is now saddled with
the responsibilities to champion the cause of global oil price
stability. Painfully, the cartel is virtually nonexistent for her
inability to steam the tide of fallen oil price.

Under the watch of the smashing oil minister, there was presidential
pronouncement to the Economic and Financial Crimes Commission EFCC, to
fish out the oil thieves. The anti-corruption agency swooped on the
NNPC and the PPPRA as well as the Department of Petroleum Resources
(DPR), carting away volumes of official documents relating to the
controversial N1.34trillion fuel subsidy payments as well as other
transactions undertaken by the agencies. Disingenuously, those who
were found to have shortchanged Nigerians in the fuel subsidy scam are
the ones sponsoring president Jonathan’s reelection campaign.

At the twilight of 2011, NEXT, one of Nigeria’s most respected
newspapers, ran a series of investigative reports that linked the
minister herself to monumental corruption. The government is yet to
act on those allegations till date! In one of those reports, titled
“Oil minister, her jeweller and their sweetheart deal”, the Minister
was said to have discretionally licensed one Christopher Aire, a
47-year-old United States-based Nigerian celebrity jewellery designer
and merchant, to be lifting crude oil.

In another report also published by NEXT, and entitled “Oil minister
in N2.2b bribery scandal”, the minister’s name was mentioned in an
elaborate scam which forced marketers to pay huge bribes in exchange
for petroleum products import license by the PPPRA. There was also the
allegation that she unilaterally assigned prospecting rights in some
state-owned lucrative blocks to some briefcase companies without open
and competitive bidding.

In the thick of the serious allegations against Diezani Alison-Madueke
for squandering N10 billion on chartered private jets since assumption
of office, which was stoutly defended in a national television by
president Goodluck Jonathan in a media chat, the son of the petroleum
minister was caught frolicking, parting and quaffing the nation’s
resources in a country where 75% of the population are wallowing in
abject poverty!

The consequences of Diezani’s Chairmanship of the OPEC are manifesting
and damning? OPEC is now helpless, inept and unable to stabilise
prices at its last annual meeting, which is an indication that the
free-fall of oil price has come to stay. To achieve oil price
stability, OPEC has to reduce production so as to address the growing
oil glut. Last week, the Daily Telegraph reported that “Oil will now
enter a period of wild price swings and “disorderly trading” that will
benefit cash-rich Middle East petro-states such as Saudi Arabia, but
will damage some of OPEC less wealthy members such as Nigeria and
Venezuela”.

No double that oil price has tumbled by more than 40% since June, when
it was $115 a barrel. It is now below $70. This comes after nearly
five years of stability. At a meeting in Vienna on November 27th the
Organisation of Petroleum Exporting Countries, which controls nearly
40% of the world market, failed to reach agreement on production
curbs, sending the price tumbling. The countries that had hit are,
Nigeria,Venezuela, Russia, Iran.

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Chris Pedersen, the Managing Director of U.S. Operations for Oak Leaf
Training Incorporation gives five reasons oil prices would continue to
slide:

1. The U.S. Oil Boom.
America’s oil boom is well documented. Shale oil production has grown
by roughly 4 million barrels per day (mbpd) since 2008. Imports from
OPEC have been cut in half and for the first time in 30 years, the
U.S. has stopped importing crude from Nigeria.

2. Libya is Back. Because of internal strife, analysts have until
recently assumed that Libya’s output would hover around
150,000-250,000 thousand barrels per day. It turns out that Libya has
sorted out their disruptions much quicker than anticipated, producing
810,000 barrels per day in September. Libyan officials told the Wall
Street Journal last week that they expect to produce a million barrels
per day by the end of the month and 1.2 million barrels per day by
early next year.

3. OPEC Infighting
There have been numerous reports about the discord between OPEC
members, leading many to believe that OPEC will not be able to reign
in production like it has done so in the past. The Saudis and Kuwaitis
have reportedly been in an oil price war, repeatedly lowering their
prices in order to maintain their market share in Asia. John Kingston,
the news director at Platts, believes that the Saudis will not be
willing to give up market share like they have done during previous
price drops.

4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors
concerned about the continent’s growth rate which is relatively slow.
Germany’s exports were down 5.8 percent in August, stoking the fears
of anxious investors that the EU’s largest economy had double dipped
into recession last quarter. Across the Eurozone, the IMF again
lowered its growth forecast to 0.8 percent in 2014 and 1.3 percent in
2015.

5. Tepid Asian Demand
Beyond slow economic growth and currency depreciation, a number of
Asian countries have begun cutting energy subsidies, resulting in
higher fuel costs despite a drop in global oil prices. In 2012, Asia’s
top spenders on energy subsidies, as a percentage of GDP included:
Indonesia 3 percent; Thailand 2.6 percent; Vietnam 2.5 percent,
Malaysia 2.3 percent, and India 2.3 percent. India is a primary
example. Between 2008-2012, India’s diesel demand grew between 6
percent and 11 percent annually. In January 2013, the country started
cutting the subsidies of diesel. Since then, diesel consumption has
plateaued.

Sometimes ago, Dr Ngozi Okonjo-Iweala, the minister of finance and the
coordinating minister of economy told the bewildered nation about oil
bunkering. She said Nigerian state and oil companies are losing a
billion dollars or more a month to oil theft by criminal networks
whose activities have expanded rapidly under the government of
President Goodluck Jonathan. According to Ngozi Okonjo-Iweala, the
trade in stolen oil led to a 17 per cent fall in official oil sales in
April, or about 400,000 barrels per day). At average April prices of
$121 per barrel, this results in a loss of $1.2bn!

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However, the minister comes short of telling Nigerians those behind
the criminal networks whose activities have led to milking the nation
dry. President Jonathan blabbed when Christiane Amanpour of CNN
conners him on the oil theft: “The international countries who buy
crude oil from oil bunkers should be held accountable for oil theft in
Nigeria”! The president refused to show leadership and put an end to
the economic plague. Is it that Mr Jonathan knows a thing or two about
the oil bunkering at the backwaters of the degraded Niger Delta
region?

Those involved in oil bunkering do not fetch crude oil with bowls or
buckets. They do so with cargo ships, Marine tankers and ocean liners,
and they are known. It’s alleged that the wife of Mr President, Mrs
Patience Jonathan owes MT Patience cargo ships 1-10 that are involved
in oil bunkering at the Forcados Terminal, Brass in Port Harcourt and
other oil producing States in the Niger Delta. These gigantic marine
tankers don’t have wings with which they fly. They are regularly being
escorted by the Nigeria Navy and other security apparatus across the
coaster lines. Nigeria is Africa’s largest oil producer, accounting
for more than two million barrels per day. But from investigation,
more than 4 million barrel per day is produced, but only two million
is accounted for. Even the Nigeria Liquified Gas, NLG is not left out
of this bizarre business.

The Anglo-Dutch oil giant, Shell has severally declared a “force
majeure” on crude oil exports from Nigeria as it struggles to repair
sabotaged pipelines. Shell’s subsidiary consistently blocked crude
export lines at Forcados Terminal in the Western Niger Delta to effect
repairs. “Force majeure” is a legal term releasing a company from
contractual obligations when faced with circumstances beyond its
control.

Shell has blamed repeated oil thefts and sabotage of key pipelines as
the major cause of spills and pollution in the oil-producing region.
Crude oil theft or “bunkering” is a major problem in Nigeria, with
estimates that the country loses some $6 billion (4.3 billion euros)
in revenue every year because of the practice. It’s safe to say that
Nigeria deserves the kind of economy strangulation it faces today. The
nation’s major sources of earnings – mono-economy – is facing
incremental downturn in the international Market. The collapse of oil
prices is due largely to oil theft as we all agreed and other sundry
issues.

What is the solution? Shouldn’t the president show some measures of
leadership and reign in his people? Presidential election is less than
8 weeks away and, Nigerians can’t bank on president Jonathan’s promise
to curb corruption or build new refineries he promised in 2011. He
should show some enthusiasm, even if it is delirium.

Erasmus Ikhide writes in from Lagos, Nigeria.

Tel: +23480 5622 5515

Follow me on twitter @erasmusikhide

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