Oil & Energy
Curbing Petroleum Products Adulteration In Nigeria
The Standards Organisation of Nigeria (SON) recently announced, its readiness to fight against adulteration of petroleum products. Its Director-General, Dr. Joseph Odumodu who disclosed this at a media briefing in Lagos explained that the exercise which is aimed at curbing adulteration of petrol and diesel would begin with the testing of petroleum products in the country.
According to Odumodu, a nationwide sampling conducted by SON on Petroleum products showed a high level of adulteration at different levels of distribution. He said that though the monitoring and testing of the products had been on for six months, a full scale test would start in February.
Indeed, this is a step in the right direction, though belated. Belated in the sense that several explosions caused by adulterated petroleum products such as fuel, diesel, gas and kerosene had been recorded in this country, most of which claimed lives and properties of the citizens. The Nigerian economy through a deliberate utilisation of human and materials resources and services in the exploration, development, exploitation, transportation and sale of crude oil and gas resources can not compromise quality, health, safety and environmental standards.
The consequences of adulterated fuel, diesel and kerosene are enormous and have been suffered by many in this country and already seen. Such consequences dip into the negative and the acts remain unchanged. Many people are not mindful of the devilish effect of petroleum adulteraton because they want to make quick money.
As part of government, it is pertinent that the Standards Organisation of Nigeria show that it is also sensitive to the yearnings of the average Nigerian, especially now that the price of fuel has gone up to N97 per litre.
The execise will ensure that the consumer actually gets one litre of quality product at the current pump price of petrol.
But it is suprising to note that the SON has been carrying out this test and Nigerians continue to witness incidents resulting from adulteration of petroleum products and the organisation continues to get complaints from consumers, especially in the manufacturing sector of the negative effect of adulterated petroleum products on their equipment.
It is important to check and discourage adulteration of petroleum products such as PMS otherwise called petrol, diesel and kerosene but it is more important to focus on and promote standard while close-marking the marketers and their companies.
This is why the Oil and Gas suppliers in the country in November last year launched on enlightenment campaign to check adulteration of petroleum products with focus on its members. The move, according to the group, was to educate them on the dangers of petroleum products adulteration and the need to identify with the group.The body which is a branch of the National Union of Petroleum and Natural Gas Workers (NUPENG) was reported to have absolved Petrol Tanker Drivers (PTD) from the blame of adultration, saying “It is the Petroleum Suppliers that perpetrate the atrocity because they are the owners of the product that is being transferred”.
The union said: “Adulteration is not the fault of tanker drivers, the fault is from the products owners. It is when you buy the product that you give instruction on what to do. It is the products owners or the suppliers that do the adulteration in order to make more gains”.
According to NUPENG, Zenon chapter Chairman, Mr. Emmanuel Nwadi, “OGS had written to retail outlets in the country to consider any product without OGS seal as having been tampered with, adding that all tanker trucks that are used for distribution of petroleum products usually have their Manholes and outlets secured with numbered seals by depot owners and transport companies, this is the strategy that we are adopting. No tanker driver is allowed to go with his truck without the prescribed seals”.
It is better to draw distinction between genuine and adulterated products to avoid some pitfalls, so with the government’s drive to fully achieve considerable quality in the petroleum industry, it is necessary to enact a law against adulteration of petroleum products. The emphasis should be on value addition to the economy by the industry.
The task ahead of the Standards Organisation of Nigeria in the effort to curb adulteration of petroleum products is to identify those perpetrating the act and make sure that the testing and monitoring of the products are done on regular basis and offenders punished. The professionalism and efficiency of the team in its monitoring and compliance tasks should depend largely on the measures of its autonomy and the extent to which it is guided by the spirit of the law. Considering the dangers inherent in the use of adulterated petroleum products, there should be a law which provides that defaulters are sanctioned by the relevant authority or institution while there is a sound regulatory tone for the industry, petroleum suppliers and marketers.
The law must provide that non-compliance with the provisions of the law would be punishable with a fine or cancellation of the business or withdrawal of the operator’s license. Reduction or total eradication of adulteration in the petroleum industry is one of the milestones the government or Standards Organisation of Nigeria should aim to achieve as the exercise begins in February.
If steadfastly carried out, which is the definite intent of SON and government, the exercise have great impact on the economy. The milestones expected from the exercise include retention of quality of petroleum and gas products, economic growth and raising scale of activities of the industry and increased utilisation of the products, creating good business image for the country, save lives and properties among others.
The Nigerian national petroleum Corporation (NNPC) had been pursuing a policy-based production model of petroleum products in the oil and gas industry and had provided guidance to ensure that the products are strictly guided. SON should build a robust collaboration among all key stakeholders to ensure that the exercise becomes an inimitable reality that forms the strategic framework upon which genuine petroleum products are sold to consumers or Nigerians.
Nigerians should wholly support the organisation in carrying out this exercise which will add value to the oil and gas industry and help to facilitate and encourage exploration and production processes, which will in turn help Nigeria to maintain its leading role in providing energy to the rest of the world. Now that SON is seriously working hard to stop adulteration of petroleum products, it will put Nigeria on the global map of quality petrol and diesel production and boost the nation’s economy as well as put the country on the path to the 20:2020 Vision or target.
Oil and gas companies should now renew their commitment to quality production as that would help to build their market strategies and capacities and also save lives and properties. Production and distribution of quality petroleum products will also enhance their opportunities to develop an in-country capacity and competency, which would aid federal Government realise its aspirations for sustainable growth and development.
The planned exercise by the Standards Organisation of Nigeria will definitely encourage and increase domestic and industrial use of petroleum products in the country and improve oil demand internationally.
Shedie Okpara
Oil & Energy
FG Woos IOCs On Energy Growth
The Federal Government has expressed optimism in attracting more investments by International Oil Companies (IOCs) into Nigeria to foster growth and sustainability in the energy sector.
This is as some IOCs, particularly Shell and TotalEnergies, had announced plans to divest some of their assets from the country.
Recall that Shell in January, 2024 had said it would sell the Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
According to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, increasing investments by IOCs as well as boosting crude production to enhancing Nigeria’s position as a leading player in the global energy market, are the key objectives of the Government.
Lokpobiri emphasized the Ministry’s willingness to collaborate with State Governments, particularly Bayelsa State, in advancing energy sector transformation efforts.
The Minister, who stressed the importance of cooperation in achieving shared goals said, “we are open to partnerships with Bayelsa State Government for mutual progress”.
In response to Governor Douye Diri’s appeal for Ministry intervention in restoring the Atala Oil Field belonging to Bayelsa State, the Minister assured prompt attention to the matter.
He said, “We will look into the issue promptly and ensure fairness and equity in addressing state concerns”.
Lokpobiri explained that the Bayelsa State Governor, Douyi Diri’s visit reaffirmed the commitment of both the Federal and State Government’s readiness to work together towards a sustainable, inclusive, and prosperous energy future for Nigeria.
While speaking, Governor Diri commended the Minister for his remarkable performance in revitalisng the nation’s energy sector.
Oil & Energy
Your Investment Is Safe, FG Tells Investors In Gas
The Federal Government has assured investors in the nation’s gas sector of the security and safety of their investments.
Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, gave the assurance while hosting top officials of Shanghai Huayi Energy Chemical Company Group of China (HUAYI) and China Road and Bridge Corporation, who are strategic investors in Brass Methanol and Gas Hub Project in Bayelsa State.
The Minister in a statement stressed that Nigeria was open for investments and investors, insisting that present and prospective foreign investors have no need to entertain fear on the safety of their investment.
Describing the Brass project as one critical project of the President Bola Tinubu-led administration, Ekpo said.
“The Federal Government is committed to developing Nigeria’s gas reserves through projects such as the Brass Methanol project, which presents an opportunity for the diversification of Nigeria’s economy.
“It is for this and other reasons that the project has been accorded the significant concessions (or support) that it enjoys from the government.
“Let me, therefore, assure you of the strong commitment of our government to the security and safety of yours and other investments as we have continually done for similar Chinese investments in Nigeria through the years”, he added.
Ekpo further tasked investors and contractors working on the project to double their efforts, saying, “I want to see this project running for the good of Nigeria and its investors”.
Earlier in his speech, Leader of the Chinese delegation, Mr Zheng Bi Jun, said the visit to the country was to carry out feasibility studies for investments in methanol projects.
On his part, the Managing Director of Brass Fertiliser and Petrochemical Ltd, Mr Ben Okoye, expressed optimism in partnering with genuine investors on the project.
Oil & Energy
Oil Prices Record Second Monthly Gain
Crude oil prices recently logged their second monthly gain in a row as OPEC+ extended their supply curb deal until the end of Q2 2024.
The gains have been considerable, with WTI adding about $7 per barrel over the month of February.
Yet a lot of analysts remain bearish about the commodity’s prospects. In fact, they believe that there is enough oil supply globally to keep Brent around $81 this year and WTI at some $76.50, according to a Reuters poll.
Yet, like last year in U.S. shale showed, there is always the possibility of a major surprise.
According to the respondents in that poll, what’s keeping prices tame is, first, the fact that the Red Sea crisis has not yet affected oil shipments in the region, thanks to alternative routes.
The second reason cited by the analysts is OPEC+ spare capacity, which has increased, thanks to the cuts.
“Spare capacity has reached a multi-year high, which will keep overall market sentiment under pressure over the coming months”, senior analyst, Florian Grunberger, told Reuters.
The perception of ample spare capacity is definitely one factor keeping traders and analysts bearish as they assume this capacity would be put into operation as soon as the market needs it. This may well be an incorrect assumption.
Saudi Arabia and OPEC have given multiple signs that they would only release more production if prices are to their liking, and if cuts are getting extended, then current prices are not to OPEC’s liking yet.
There is more, too. The Saudis, which are cutting the most and have the greatest spare capacity at around 3 million barrels daily right now, are acutely aware that the moment they release additional supply, prices will plunge.
Therefore, the chance of Saudi cuts being reversed anytime soon is pretty slim.
Then there is the U.S. oil production factor. Last year, analysts expected modest output additions from the shale patch because the rig count remained consistently lower than what it was during the strongest shale boom years.
That assumption proved wrong as drillers made substantial gains in well productivity that pushed total production to yet another record.
Perhaps a bit oddly, analysts are once again making a bold assumption for this year: that the productivity gains will continue at the same rate this year as well.
The Energy Information Administration disagrees. In its latest Short-Term Energy Outlook, the authority estimated that U.S. oil output had reached a record high of 13.3 million barrels daily that in January fell to 12.6 million bpd due to harsh winter weather.
For the rest of the year, however, the EIA has forecast a production level remaining around the December record, which will only be broken in February 2025.
Oil demand, meanwhile, will be growing. Wood Mackenzie recently predicted 2024 demand growth at 1.9 million barrels daily.
OPEC sees this year’s demand growth at 2.25 million barrels daily. The IEA is, as usual, the most modest in its expectations, seeing 2024 demand for oil grow by 1.2 million bpd.
With OPEC+ keeping a lid on production and U.S. production remaining largely flat on 2023, if the EIA is correct, a tightening of the supply situation is only a matter of time. Indeed, some are predicting that already.
Natural resource-focused investors Goehring and Rozencwajg recently released their latest market outlook, in which they warned that the oil market may already be in a structural deficit, to manifest later this year.
They also noted a change in the methodology that the EIA uses to estimate oil production, which may well have led to a serious overestimation of production growth.
The discrepancy between actual and reported production, Goehring and Rozencwajg said, could be so significant that the EIA may be estimating growth where there’s a production decline.
So, on the one hand, some pretty important assumptions are being made about demand, namely, that it will grow more slowly this year than it did last year.
This assumption is based on another one, by the way, and this is the assumption that EV sales will rise as strongly as they did last year, when they failed to make a dent in oil demand growth, and kill some oil demand.
On the other hand, there is the assumption that U.S. drillers will keep drilling like they did last year. What would motivate such a development is unclear, besides the expectation that Europe will take in even more U.S. crude this year than it already is.
This is a much safer assumption than the one about demand, by the way. And yet, there are indications from the U.S. oil industry that there will be no pumping at will this year. There will be more production discipline.
Predicting oil prices accurately, even over the shortest of periods, is as safe as flipping a coin. With the number of variables at play at any moment, accurate predictions are usually little more than a fluke, especially when perceptions play such an outsized role in price movements.
One thing is for sure, though. There may be surprises this year in oil.
lrina Slav
Slav writes for Oilprice.com.
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