Oil & Energy
SPDC Links Major Spills To Sabotage
The Shell Petroleum Development Company of Nigeria has insisted that it does not make any business sense for any hydrocarbons exploration and production company to deliberately spill crude oil into the environment in a competition-ridden industry.
Instead, Shell would spend all available resources and deploy the most modern technology to capture, process, pump and store for export, the minutest drop of crude oil and natural gas liquids in order to make maximum return on investments.
Raymond Asukwo, head, pipelines, SPDC-East, who said this during a special media session in Port Harcourt last Thursday, stressed that the clarification became necessary following certain insinuations that oil majors operating in the Niger Delta, including Shell, were in the habit of spilling oil, and not making efforts to clean-up and remediate impacted sites.
Asukwo, noted instead, that the activities of pipeline vandals, crude thieves and operators of illegal refineries, have unleashed more devastating damage to the region’s environment.
He explained that more than 70 per cent of all spill incidents and 98 per cent of total volume of oil spilled yearly are associated with illegal activities of mostly armed gangs, who depend on crude and pipeline theft to eke out a living or deliberately attack oil facilities as a means of expressing their angst over sustained neglect of the region by the government.
Asukwo, particularly fingered Bomu and Soku oil fields in Rivers State as worst areas where criminal gangs have created oil blocks, built manifolds and refineries for themselves using most crude and unsafe means to siphon oil into barges, vessels, tankers, and sometimes, train coaches in exchange for cheap money and arms from ready buyers.
The Shell pipelines expert stated that the activities of operators of illegal refineries, oil bunkerers, and facilities vandals now threaten the United Nations Environment Programme (UNEP) study team’s efforts in Ogoniland as illegal refineries and oil facilities’ sabotage have become more frequent features, especially in the Bomu, Bodo, Kpor, K-Dere axis of Gokana.
A 40-minute overfly of Bomu field in Ogoni by The Tide, United States-based Cable News Network (CNN), and Bloomberg News spotted no fewer than 20 islands or blocks harbouring more than 200 illegal refineries, numerous illegal connections to crude facilities and deserted oil bunkering points, with resultant smokes billowing at intervals, and the crude thieves scampering for cover on sighting the helicopter.
The team also saw, with utter trepidation, kilometers of stretch of streams and rivers which empty into Bonny river, heavily polluted with crude formations and slicks, while the green vegetation has been completely eliminated in very large, hitherto, mangrove forests and wetlands.
Asukwo had explained that SPDC has some of the best oil spills management systems in the world, including Pipeline Integrity Management System (PIMS), Pipeline Intelligence Pigging System (PIPS), Oil Spills Response Management System (OSRMS), Oil Spills Contingency Plan (OSCP), as well as Communities And Shell Together (CAST), which manages pipeline stakeholder issues such as surveillance and security.
He said the application of the above plans ensures that weak and faulty pipelines, valves, among others, are detected and replaced to maintain production capacity, saying that only unserious business concern would allow its critical and essential facilities to fail, and consequently loose revenue.
According to him, deferments arising from crude shut-in as a result of operational failure or sabotage on its facilities and huge costs of repairs were business challenges Shell would want to avoid but pointed out that the socio-economic conditions have forced the company to operate under tight situations.
Nelson Chukwudi
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.
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.
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.
