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South African Criminals Mimic Nigerian Oil Pipeline Vandals

South African criminal gangs have begun to do what Nigerian vandals have been doing for three decades.

They drill holes in pipelines and siphon fuels.

Organised syndicates stole 10Million litres of fuel in the past year in South Africa, according to a report by the Sunday Times of Johannesburg. They siphoned off fuel, in some cases into their own tankers – that are valued at around $60Million (or R1Billion) per year.

The gangs achieved this by targeting pieces of Transnet’s 3,800km underground pipelines, which transport petrol, diesel, gas, crude oil, and aviation fuel across the country.

Transnet is S.A’s state-owned logistics company. It runs the rail system; it operates the ports and builds and manages the petroleum pipeline system in Africa’s most industrialised economy.

For close watchers of the Nigerian oil industry, the petroleum theft story from elsewhere feels eerily familiar. Crude oil theft in Nigeria rose steadily in the ten years from 2007 and 2017 and peaked between 2011 and 2014; with some estimates indicating that up to $15.9Billion was lost in 2014 alone. It has grown from a localised, small scale activity into a multi-million-dollar illegal industry with many complicit stakeholders. But crude oil theft in Nigeria is different from petroleum product theft, which is just about everywhere along the state hydrocarbon company NNPC’s pipeline right of way. In Nigeria, petroleum product theft involves more than criminal gangs. It is routine.

South Africa’s Trasnet’s network of pipelines pumped 17,825 Million Metric Tonnes of products in 2019.

To put in context, Transnet’s pipeline revenue increased by 17.2% to $319Million (R5.3Billion) in 2019 (2018: $271Million (or R4,5Billion)), due mainly to the regulatory agency’s decision to increase the 2018/19 tariff for petroleum transportation. This means that the value of the theft is around 20% of the revenue accruing to the pipelines

The Sunday Times report notes, exasperatedly: “So brazen are the thieves, who have their own tanker trucks to transport the stolen product that in one case they reacted a shack on a farm where a pipeline passes and punched a hole into it to help themselves”

Transnet says it is working with the Directorate for Priority Crime Investigation (“Hawks”), National Crime Intelligence and SAPS and that the effort is “generating positive results with a number of breakthroughs in the form of arrests as well as the impounding of vehicles and fuel tankers, being recorded”.

The thefts are not good for branding for Transnet, which fancies itself as Positioning Pipelines as an international best-in-class pipeline operator and offering subject matter expertise in the pipeline arena

Its also bad at a time when Transnet is investing in more infrastructure to take advantage of the deliveries from the pipelines. The company says in its report that it invested $5.7Million (R95Million) last year in firefighting upgrades at Pipelines to ensure stringent compliance to safety standards and regulations; and $5.9Million (R99Million) IN the multi-product pipeline towards the construction of tanks.

Another reason to be worried about petroleum product theft: last year, the National Energy Regulator of South Africa (NERSA) increased the Pipelines’ allowable revenue (AR) by 7.69% for the

2020 financial year. This translates into an 11% increase in the Durban to Alrode tariff for the 2020 financial year.

 


78 Companies Bid to Repair and Operate Nigeria’s Downstream Infrastructure

Seventy-eight (78) companies submitted virtual bids to rehabilitate critical downstream pipelines, associated depots and terminal infrastructure of the Nigerian National Petroleum Corporation (NNPC) through the Finance, Build, Operate and Transfer (BOT), the company reports.

On bid are 5,120 kilometres of pipelines, traversing the entire country, with two coastal depots in Lagos, in the west and Calabar in the east.

The pipelines have been subjected to many cycles of vandalism for scores of years, and the depots have suffered from poor maintenance. There are 17 other depots around the country, all of them linked to the pipeline network, but they are not up for bid.

The losses from vandalized pipelines and rusted depots have manifested as a “fuel tanker crisis” in the country, as fuel laden tankers, playing the role of virtual pipelines, clog the highways and render the routes to the Lagos port difficult to access.  As the losses have been charged to the National Treasury, the state hydrocarbon firm has frequently faced strident criticism for not privatizing these facilities. NNPC has, however, always resisted any sale of its equity in any asset, let alone go the full hug of privatization.

Those who win the bids “will fund these pipelines, they will construct them, they will operate them with us and then ultimately they will fully recover their investment from the tariff which we will pay for using these pipelines and as soon as they recover their cost and their margin, they will hand over these assets back to us,” declared Mele Kolo Kyari, NNPC’s Group Managing Director.

The final partners of the bid opening will be selected by the end of the first quarter of 2021, Kyari explained.

 

 

 

 

 

 


Petroci in League with Sahara for a $43Million LPG Project

Sahara Energy Logistics Holding Limited (A Sahara Group company) and  Société Nationale d’Opérations Pétrolières de la Cote d’Ivoire (The National Oil Company of Cote d’ivoire, Petroci Holding), have entered into a Joint Venture Agreement (JVA) to facilitate the construction of a 12,000 Metric Tonnes Liquefied Petroleum Gas (LPG) storage facility to guarantee LPG supply security in the nation.

The cost of the project is estimated at $43Million and will be executed in two phases, with commissioning scheduled for November 2021 and October 2022 respectively.

Incorporated as SAPET Energy S.A., the joint venture company will handle the construction, operation, and maintenance of the ultra-modern LPG storage terminal. “Upon completion, the facility will become the largest of its kind is Sub-Saharan Africa”, Sahara’s spokesman, Bethel Obioma, claims in a release, “and more importantly, support the government’s efforts to meet Cote d’Ivoire’s growing LPG demand”.

The challenge with Obioma’s claim is that there are facilities with similar size in Nigeria currently and a raft of construction of larger sized LPG terminals in the country, is on course for commencement before the end of 2021.

However, Ibrahima Diaby, Director General, Petroci, said of the SAPET project: “this joint venture project is the first of its kind in Cote d’Ivoire and will serve as a model for other projects in the energy sector. It is a historic event that will pave the way for a robust and seamless storage, distribution, and supply of LPG. This translates to more clean energy, growth, and productivity in Cote d’Ivoire. We are delighted and look forward to more collaboration with Sahara Energy.”

“We are excited about the project and the huge opportunity it will confer on Cote d’ Ivoire as the leading LPG hub in the sub-region”, commented Olayemi Odutola, Country Manager, Sahara Energy.

 


Jet Fuel Demand Will Be Harder Hit Than Other Premium Fuels

The economic crisis caused by COVID-19 is hitting Jet Fuels far much more than it does Road Fuels.

Total global demand for road fuels will fall by 10.1% in 2020, or by 4.8MillionBPD year-on-year. The Rystad estimates Road fuel demand in 2019 to have been 47.4MillionBPD. It now sees this number dropping to about 42.6MillionBPD in 2020.

But the Norwegian conslutancy expects jet fuel will be hit the hardest. We expect global commercial air traffic will fall by at least 51% this year versus the levels seen in 2019, which we estimate stood at around 99,700 flights per day. For 2021, we expect around 76,800 flights per day. These numbers will be revised as operators continue to cut routes.

Many distressed airlines are facing heavy cost cuts and are laying off unprecedented numbers of employees as many non-essential routes are closed.

As a base case we now assume that the common summer air travel peak will not occur at all this year. We see global jet fuel demand falling by almost 41.4% year-on-year, or by at least 3MillionBPD. Last year’s demand for jet fuel was about 7.2MillionBPD.

Jet fuel demand in April was as low as 2.9 MillionBPD, and shrank further to 2.8Million BPD in May 2020.

In 2021, jet fuel demand is expected to average 6.1MillionBPD


Recovery of US Gasoline Demand Stalls..Will Affect Crude Prices – IHS Markit

Demand fell back during last full week of August resulting in volumes for the month down 18% compared to last year

The recovery in U.S. gasoline consumption has plateaued as the summer driving season comes to an end and the school year begins for wide swaths of the country.

Latest data by OPIS, an IHS Markit (NYSE: INFO) company shows that demand actually fell 1.9% during the last full week of August from the previous week. The four-week rolling average for the period ending August 29th now shows demand resting at 18.2% below prior year levels.

U.S. gasoline sales had improved rapidly from May to early July following the collapse in early April that came with the national shutdown, when sales were 50% below prior year levels. But the recovery had begun to sputter even before demand slipped backwards in that final week of August.

“The plateauing in demand is a symptom of the continuing aggressiveness of the coronavirus and is telling us that it will take longer to get back to normal,” said Daniel Yergin, vice chairman, IHS Markit and author of The New Map.

The most recent OPIS survey now suggests that the post-COVID peak for U.S. volumes occurred during the week ending August 15th at 7.844 million barrels per day—15.4% below prior year levels.

The coming months typically bring a seasonal reduction in demand from the high points of the summer driving season. For the years 2017-2019 the average drop in U.S. gasoline demand from August to October has been on the order of 5 to 10%.

“Aside from the potential for a short-lived bump in demand from the Labor Day weekend, history suggests that the end of the U.S. driving season inevitably brings lower demand for gasoline thanks to shorter days, less vacations and more inclement weather,” said Fred Rozell, president of OPIS. “Now that those prime driving days are behind us, we are likely to settle into a prolonged pause in the demand recovery.”

OPIS DemandPro tracks actual weekly same-store gasoline consumption volumes at over 15,000 stations, aggregated on a national, regional and state level. This allows users to track and benchmark industry trends for overall retail gasoline sales.

The OPIS survey—tracking actual gallons out of retail stations—shows greater demand losses than recent figures reported by the Energy Information Administration (EIA) on account of different methodology, that EIA measures movement of gasoline from primary stocks rather than actual consumption at stations.

The latest OPIS report for the week of August 29th shows demand losses in every portion of the country over the prior year period.

  • The Mid-Continent region posted the most moderate decline, down 17.44%
  • The Southeast registered the sharpest declines, down 27.1%, but that was due to big volumes last year due to pre-hurricane buying. Florida showed an even larger year-on-year differential of 35% for the same reason.
  • The Pacific Coast was off 24.4%. Year-on-year through-puts in the region never got better than 20% off from 2019 levels.
  • The Northeast had seen its year-on-year consumption differential whittle down to within 16% of 2019 levels, but the past two weeks were weaker, and the gap widened back to 20% this past week.

“The data points to a challenging environment for refiners and marketers in the remainder of 2020,” Rozell said. “Cheap gas prices relative to the past 16 years will help curb some of the demand destruction, but retailers will have to adjust to shifting habits as consumers likely make fewer visits to traditional stations for fill-ups in favor of more ‘aggregated trips’ to supermarkets and big boxes chains that also sell fuel.”

OPIS DemandPro updates gasoline retail sales every week.

 


Kenya Hops on the Subsidy Highway for Petroleum Products

Kenya, a non-hydrocarbon producing country, is tinkering with the subsidy initiative, to cushion effects on motorists whenever there is a high spike in the cost of petroleum products.

A subsidiary legislation, currently under review in the country’s parliament, grants powers to the Petroleum Cabinet secretary to pump in money from a subsidy fund to product suppliers to cut fuel prices and cushion motorists from sharp spikes

The subsidy will be supported by money that will be raised from fuel consumers through the Petroleum Development Levy, which was increased in mid July 2020 to $0.05 (or Sh5.40) a litre of fuel from $0.0036 (Sh0.40), a 1,250% rise.

“The Cabinet Secretary may by writing to the administrator, request for a draw down from the Petroleum Development Levy Fund to stabilise local petroleum prices where he deems necessary,” the Legislation says.

So, in a way, the subsidy is not coming from the treasury, rather, from funds that motorists themselves have contributed. This is the difference with the fuel subsidies in Egypt and Nigeria.

Fuel prices I Kenya ratcheted up to a 13 year high as the surge in Petroleum Development Levy, coalesced with increase in crude oil prices.

From mid-July, Motorists in Nairobi started paying  $0.85 (Sh91.87) per litre of diesel from $0.69 (Sh74.57, representing a $0.16 (Sh17.30) increase, and $0.105 (Sh11.38) more for a litre of super petrol at $0.92 (Sh100.48)..

The Cabinet Secretary (Kenya’s title for minister) will determine the amount of subsidy fuel consumers will be offered when prices rise by large margins.

 


NCDMB Invests in Energy Park, Oil Blending Plant

The Nigerian Content Development and Monitoring Board (NCDMB) has signed equity investment agreements with two companies-Duport Midstream Company for the establishment of an Energy Park in Egbokor, in the country’s midwest and Eraskon Nigeria Limited, for a lubricating oils blending plant in Gbarain, in Nigeria’s south central east.

The planned Energy Park comprises a 2,500BPD modular refinery, as well as a thirty million standard cubic feet of gas a day (30MMscf/d) gas processing facility, which will include a CNG facility and 2MW power plant.

The lubricating oils’ blending plant will have the capacity to produce 45,000litres per day and enhance the availability of engine oils, transmission fluids, grease and other products.

Simbi Wabote, Executive Secretary NCDMB, explained that the investments were part of the approvals granted recently by the Board’s Governing Council chaired by Timipre Sylva, Minister of State for Petroleum Resources, He clarified that the investments were coming under the Board’s commercial ventures programme and were in sync with the NCDMB’s vision to serve as a catalyst for the industrialisation of the Nigerian oil and gas industry and its linkage sectors.

The Duport partnership, Wabote indicated, is in furtherance of the Board’s strategy to enhance in-country value addition by supporting the establishment of processing facilities close to marginal or stranded hydrocarbon fields.

NCDMB has already had partnered with the Waltersmith Group and Azikel Petroleum Company for the establishment of modular refineries in Imo State and Bayelsa State respectively.

 


Gasoline Prices Rise in Ghana, Kenya

Gasoline prices have risen in Kenya by Kenyan Shilling (Sh)5.77 higher per litre, while diesel and kerosene prices dropped by Sh3.80 and Sh17.31 respectively in changes announced by the Energy and Petroleum Regulatory Authority (EPRA) a week ago.

A litre of petrol will cost Sh89.10 per litre in Nairobi, the capital city, an increase from the current Sh83.33 while that of diesel will be sold at Sh74.57. Kerosene will retail at Sh62.46 per litre in the city.

“The changes in this month’s prices are as a result of the average landed cost of super petrol increasing by 31.54% from $188.7 per cubic metre in April to $248.21 per cubic metre in May 2020, diesel increasing 5.58% from $242.13 per cubic metre to $228.62 and kerosene decreasing by 51.84% from $262.44 per cubic metre to $126.39 per cubic metre,” says Pavel Oimeke, EPRA Director General, in a statement.

In Ghana, over the weekend of June 19-21, Shell and Goil, two of the country’s largest Oil Marketers, increased their prices by 4% percent, in addition to the 8% bringing the total increase to about 12% within a week.
But the Executive Director of Ghana’s  Institute of Energy Security (IES), Paa Kwasi Anamua Sakyi, says
other Oil Marketers were unlikely to increase their prices to match Goil and Shell at the pump, r due to competition for market share.

The combined Increase in the depreciation of the local currency Ghana Cedi against the US dollar, the world’s major trading currency, added to the rise in prices of crude oil in the international market, have put pressure on the pump prices in Ghana, the IES says.

Local Kenyan media explain that the recovery on the international crude oil market, “now reverses three months of a steep drop in prices that saw the product sell Sh18 per litre cheaper in April 2020.

They also attribute the marginal drop in diesel prices to “lower demand as summer catches on and the need for heating falls in Europe and America while kerosene, which falls in the same class with Jet A1, lost demand due to the grounding of air travel.

The Energy and Petroleum Regulatory Authority said the changes in the pump prices came as a result of shifts in landed costs of the three products, which decreased for diesel and kerosene and rose for petrol.

The Kenyan government in September introduced a Sh18 per litre adulteration levy on kerosene to discourage its use as an adulterant by a fuel cartel who targeted the wide price margin between kerosene and diesel to make millions.

 


MOMAN Outlines Agenda to Take Nigeria Out of ‘Subsidy Trap’

Nigeria’s petroleum product marketers, under the aegis of Major Marketers Association of Nigeria (MOMAN), have outlined a comprehensive agenda to take the nation out of the gasoline subsidy regime, which cost around $2Billion to service in the last one year.

The roadmap contains five clear messages, starting with the government divesting  the power to increase or decrease  petroleum prices, and including calls for annulling the Price Equalization Fund (PEF), discontinuation of Direct sales and Direct Purchase (DSDP)  programme, amending the law setting up the Petroleum Products Pricing Regulatory Agency (PPPRA) and inaugurating an open access to foreign exchange to all petroleum product importers.

This radical blueprint of reforms, from one of the several stakeholders in Nigeria’s downstream sector, is contained in a statement by Tunji Oyebanji, Chairman of MOMAN.

In it, the association requests:

  • A fundamental and radical change in legislation is necessary. The clear and obvious risk is that the country has never been able to increase pump prices under the PPPRA Act, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds.
  • Purchase costs and open market sales prices for petroleum products should not be fixed but monitored against anticompetitive and antitrust abuses by the already established competition commission and subject to its clearly stated rules and regulations.
  • A level playing field. Everybody should have access to foreign exchange at competitive rates to be able to import and sell petrol at a pump price taking its landing and distribution costs into consideration.
  • Discontinuation of the Direct sales and Direct Purchase (DSDP)  programme. All foreign exchange proceeds from all sales of crude be paid into the same pool from which all importers can access foreign exchange at the same rate.”
  • The Price Equalization Fund mechanism should be discontinued and its law repealed as the cost of administration of equalization has become too high and the unequal application of payments by marketers distorts the market and creates market inequities and unfair competition. Internal equalization has been the practice with diesel distribution and sales since 2010 when diesel was fully deregulated.
  • The pricing system should allow internal equalisation by marketers which would be both competitive and equitable.
  • Fuel import should enjoy priority access in allocation of foreign exchange, again through a transparent auditable and audited process of open bidding. Conditions for accessing foreign exchange should be streamlined and specific delays before access imposed unilaterally on the downstream oil industry should be discontinued as being inequitable.”

MOMAN said it was stating its position, in the context of the announcement by Timipre  Sylva, Minister of State for Petroleum Resources, that the government would implement a policy of “price modulation”, which means, in MOMAN’s view, that the state will give effect to existing legislation enabling it to set prices in line with market realities through the Petroleum Products Pricing Regulatory Agency (PPPRA) as provided in its Act.

“The clear and obvious risk is that the country has never been able to increase pump prices under this law, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds”, MOMAN stated.

MOMAN admits that “there is no country or economy where governments do not have the power to influence prices”, however, “Governments use economic tools such as taxes or interventions on the demand side or the supply side of the market and other administrative interventions to influence prices where it needs to”.

“The problem here is that government has retained for itself by law the power and the responsibility to fix pump prices of PMS which is what puts it under so much pressure and costs the country so much in terms of under-recoveries or subsidies when it cannot increase prices when necessary to do so.

”It makes sense to relieve itself of this obligation now when crude prices are low and resort to influencing prices using the same tools it does for any other commodity or item on the market”.

“Our current situation, laid bare by the challenges of Coronavirus to the health of our citizens in particular and and economy of our country in general, demands that we are honest with ourselves at this time. A fundamental and radical change in legislation is necessary.

“When crude oil prices go up, government has always been unable to increase pump prices for socio-political reasons leading to these high subsidies and we believe the only solution is to remove the power of the government to determine fuel pump prices altogether by law.”

MOMAN recommends a legal and operational framework comprising of a downstream Industry operations regulator, the Federal Competition and Consumer Protection Commission (FCCPC) or Competition Commission (for pricing issues) and the interplay between demand and supply which will ensure a level playing field, protect the Nigerian Consumer and curb any market abuse or attempts to deliberately cause inequities in the system by any stakeholder.

“In line with change management principles, consultation and engagement with market players should clearly spell out the path and final destination which is full price deregulation”.

 


Industry Demands Clarity Over Nigeria’s End of Subsidy Regime

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