New President Takes Over in Nigeria, Rebel Group Offers Grace Period Before Resuming Attacks on Oil Facilities
Goodluck Jonathan (right) is officially sworn in as Nigeria’s new president on May 6, 2010. (image: voanews.com)
Nigeria’s president Alhaji Umaru Yar’Adua died on Thursday, ending a months-long illness that sent the president to Saudi Arabia for medical treatment and prevented him from performing his duties since November of last year. Since that time, Vice President Goodluck Jonathan has been acting president of the country, and officially assumed the title shortly after Yar’Adua’s death.
Jonathan’s official assumption of the presidency brings a certain amount of political stability to Nigeria, ending months of speculation on Yar’Adua’s state of health and who would be his successor. Though Jonathan now takes the reins of power, he is unlikely to bring much change to the Nigerian oil industry, which is plagued by corruption and inefficiency. His re-appointment of a former head of Nigeria’s national oil company in mid-April was interpreted as a political move that signifies more of the same within the oil ministry.
A more pressing issue, however, is the tenacious resistance of rebel groups in the oil-rich Niger Delta, which have for years plagued both public and private oil interests in the nation with sabotage, kidnapping, and other attacks on oil infrastructure. Nigerian newspaper The Punch reported on Monday that the Movement for the Emancipation of the Niger Delta (MEND), the largest of the rebel groups, announced that it would give the new president a grace period of “some weeks” to address the issues facing Delta residents. In an email to the French press agency AFP, MEND highlighted “resource control” as its main grievance. The group has repeatedly called for more equal distribution of oil income to residents of the area, who have long been stricken with poverty.
Jonathan is a native of the Rivers State, the province that includes the Niger Delta, and his roots offer a glimmer of hope for a new focus on resolving the social problems and armed conflicts there. However, President Yar’Adua’s death has hampered an amnesty and reconciliation program begun shortly before he fell ill. The program saw some initial success, as thousands of rebels laid down their arms and Nigerian oil production reached a steady plateau last fall. But the second phase of the amnesty program, which was supposed to provide job creation and infrastructure improvement programs in the delta, appears to have been stalled indefinitely by Yar’Adua’s death.
MEND’s email message placed the onus Nigeria’s new president to resume the program where it stalled and bring peace to the region:
Only time will tell if Jonathan is a blessing or a curse to the region… Jonathan has to prove himself with the actions and decisions he will be making in the coming days and weeks and that will help us determine if he is the Messiah or not.
A state of peace and relative harmony is of great interest to international oil companies operating in Nigeria, who stand to increase their profits, and also to world oil consumers. Because of Nigeria’s status as Africa’s biggest oil producer and one of the largest producers in the world, stable and/or increasing crude oil production in that country would help bring less volatile and lower oil prices, which could help moderate long-term heating oil and gasoline prices here in the US.
The “Yes Men” Target Royal Dutch Shell, Issue Fake Apology to Niger Delta
A member of the Yes Men apologizes on behalf of Shell. (image: Mike Bonnano/The Yes Men via motherjones.com)
The “Yes Men” are a group of activists and performance artists who have made their name by posing as representatives of powerful businesses or organizations. We last covered them on HeatingOil.com for their prank on the Chamber of Commerce, when the Yes Men—in the guise of Chamber of Commerce spokesmen—held a phony press conference to announce that the Chamber had reversed its position to support the pending climate bill.
Their most recent target was Royal Dutch Shell, reported Mother Jones. Shell has extensive operations in the Niger Delta, and the Yes Men’s hoax centered on issuing an apology, in Shell’s name, to the residents of the Niger Delta for human rights abuses. The Yes Men, as they’ve done previously, held a press conference (video below) to read Shell’s public apology, and also launched a website, shellapologises.com.
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When the Chamber of Commerce was on the receiving end of a Yes Men prank, they retaliated by suing for copyright infringement. There’s no word yet on Shell’s response, but Mike Bonnano of the Yes Men told Mother Jones that he looked forward to a reaction but was prepared for silence:
It would be a bonus if they counter attack. But success does not require a response, it is just enhanced by it. If they fail to attack us, after all, we can always assume their identity and attack us for them, as we did with Dow Chemical in the past.
Car Bombs Rattle Attempt to Renew Amnesty Process in Nigeria, Threats to Oil Production Intensify
Rebels attacked government meetings in the southern Nigerian city of Warri. (image: cnn.com)
Last September, an amnesty program initiated by the government of Nigeria had convinced thousands of militants to lay down their arms and succeeded in bringing some calm to the crucial oil-producing region of the Niger Delta. In October, the fragile peace in the Niger Delta had helped increase Nigeria’s oil production and exports. By December, the peace in the Niger Delta had begun to unravel. President Umaru Yar’Adua had left the country for medical treatment, and the amnesty program stalled.
On Monday, talks aimed at re-starting the amnesty process were interrupted by two car bombs, Reuters reported. The car bombs exploded near a government building in the southern Nigerian city of Warri and injured some six passersby, but no serious injuries or deaths were reported. The main rebel group operating in the Niger Delta, MEND, claimed responsibility for the attacks. The group said the bombings were in response to comments from a provincial politician that labeled MEND “a media creation.” The group also expressed frustration at the exclusion of community representatives from the amnesty process under President Yar’Adua’s acting replacement, Goodluck Jonathan. The MEND statement made clear its intention to step up attacks on oil infrastructure in the Niger Delta and included a specific threat against installations operated by French corporation Total, which has not previously been targeted.
This Week in Heating Oil March 12: Niger is Not Nigeria
It’s extremely difficult to pinpoint with great accuracy why oil prices go up or down—even after the fact. On Monday, we reported on one instance last month where one highly unusual factor definitely contributed to higher oil prices: bad geography.
On February 18, oil traders mistaking Niger for Nigeria began buying up crude oil contracts on the expectation that political upheaval in oil-rich Nigeria would put a major dent in world crude supplies. Once the major error became clear, the buying frenzy subsided a bit, but subsequent days’ retail prices of heating oil and gasoline increased, at least partially as a result of the oil traders’ mixing up the two African nations.
Oil traders, we’ve got something for you:
(image: segue.atlas.uiuc.edu)
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Traders’ Error in Elementary Geography Pushed Up Oil Prices in February
When oil traders got two similarly named African countries mixed up last month, heating oil and gasoline consumers paid the price. (images: pickatrail.com)
Here at HeatingOil.com, we often report on the maddeningly confusing logic (or lack thereof) behind the movements of oil prices.
Perhaps the most important lesson to be learned from such reports is that in the oil markets, perception is everything. Just last week, a marginally positive US employment report caused a spike in crude oil prices that drove up gasoline and heating oil prices. If the business media is to be believed, oil traders perceived the jobs data as a sign that the US economy is on its way to recovery, which means US demand for oil will pick up sometime soon, which means prices will pick up also, which makes traders want to buy up oil futures contracts to cash in on the coming price increases. As more traders bought up contracts, the demand for contracts increased, sending crude oil prices upward on the New York Mercantile Exchange on Friday. As a direct result of the buying trend on Friday, heating oil and gasoline consumers are paying a few cents more per gallon today.
Vicious Gang…of Swordfish Halt Crude Exports from Angola
They’re coming…for your crude oil! (So don’t leave it in the middle of the ocean) (image: s1.hubimg.com)
New threats to African crude oil exports reared their shiny heads over the weekend: swordfish.
Along with rebel saboteurs and siphoning thieves in Nigeria, and tanker-hijacking pirates off the coast of Somalia, swordfish have emerged as a force to be feared by oil exporters in Angola.
Reuters reported on Tuesday that oil traders had stated that swordfish caused a puncture in an oil loading pipe, which resulted in a three-day shutdown of outbound tanker shipments of Angolan Girassol crude. French international oil giant Total halted shipments and declared force majeure on its Angolan crude as a result of the damaged pipe, but resumed shipments once the pipe was repaired. One oil trader summed up the situation: “It was caused because of swordfish. Now the swordfish have passed, so the force majeure has been lifted.”
Force majeure is a legal term freeing a party of its contractual obligations as a result of extraordinary circumstances, including “acts of God.” Such acts usually come in the form of earthquakes, volcanoes, and other natural disasters, but in this case came in the form of large fish with pointy bills.
Swordfish attacks have hindered Angolan oil exports before. Apparently, sword-proof loading pipes are pretty hard to come by.
Nigerian Rebels Call Off Cease Fire; New Attacks Could Bring Higher Oil Prices Soon
MEND rebels will soon resume campaigns against the Nigerian government and foreign oil companies in the Niger Delta. (image: timeinc.net)
Nigerian militants called for an end to a 3 month-old cease-fire with the Nigerian government on Saturday, an article posted on Sunday to the Christian Science Monitor’s website reported. A coalition of Niger Delta rebel groups led by the largest and most powerful of these groups, Movement for the Emancipation of the Niger Delta, known as MEND, referred to the cease-fire agreement and the government’s amnesty program as “a sham.”
MEND spokesman Jomo Gbomo said in a statement announcing an end to the cease-fire that, “All companies related to the oil industry in the Niger Delta should prepare for an all-out onslaught.”
“Nothing will be spared,” said Gbomo, and those companies whose staff are harmed will “bear the guilt.” Read More »
Flywheels Show Promise for Storage of Renewable Energy
Diagram of a room stocked with flywheel energy storage devices. (image: cogeneration.net)
One of the big challenges for solar or wind power is that they are intermittent, not constant. The sun only shines half the hours at best (not even counting clouds or rain), and similarly, the wind does not blow continuously. To make these energy sources more practical, efficient power storage is necessary; you need to be able to top up the “battery” when the power is on and then use it to provide electricity at night, on overcast days, or when the air is still.
As reported by the New York Times Monday, a Massachusetts company thinks it has a solution to the problem of energy storage: flywheels.
A flywheel is a nothing more than a heavy wheel that rotates or spins freely. If you connect it the right kind of dual-purpose electric motor—some electric motors, like the ones in hybrid and electric cars, can function as both motors and generators—you can use the motor to spin the flywheel up to speed when there’s a surplus of power. Then, when you need energy, you slow down the wheel and convert its momentum back to electricity. If the wheel is heavy enough and spinning fast enough—the ones that Beacon Power is installing near Albany, New York, weigh a ton each and spin up to 16,000 times a minute (267 times a second)—you can store an enormous amount of energy in them.
China Refined Record Amount of Oil in 2009
Refineries run by CNPC, China’s state-owned oil company, turned out record amounts of oil products. (image: turner.com)
Bloomberg reported yesterday that the rapidly recovering Chinese economy spurred a record amount of oil refining last year. Refining rose 7.9 percent from 2008’s total, and in the record month of December China refined 25 percent more than in the same month in the previous year. Much of the increase in refining came from gasoline production, which was up 13 percent as China’s auto market expanded to make it the world’s largest. The United Nations predicts that China’s economy will grow four times faster this year than that of the US.
Many analysts, including the finance gurus at Goldman Sachs have pointed to the growth of developing economies such as China’s as a major factor in the high oil prices of the past few years. Others, though, see indications that China’s role has been overstated, and that its oil consumption will not continue at current rates as its economy modernizes and becomes more efficient.
Shell Moves Focus from Nigeria as Attacks, Abductions Continue
Shell CEO Peter Vosser. (image: static.guim.co.uk)
An article posted on Tuesday to Rigzone.com reported that Royal Dutch Shell’s Chief Executive Peter Voser said that Nigeria is no longer a focus for the company’s growth.
“Nigeria is still a heartland for Shell, but we no longer depend on it for our growth aspirations,” Voser wrote in comments posted to the company’s website Tuesday. “This gives us more flexibility in deciding when and how to develop oil and gas resources in Nigeria.”
Although Shell has been a force in Nigeria’s oil industry for decades, it may be looking to significantly reduce its presence in that country. Shell’s operations have long been hampered by acts of violence, kidnapping, and sabotage on infrastructure in Nigeria’s oil producing regions.
Another Oil Pipeline Attack Threatens Cease Fire in Nigeria
Attacks on pipelines by armed militants have frequently disrupted Nigeria’s oil production. (image: javno.com)
With the Nigerian president receiving medical treatment in Saudi Arabia, and the US increasing security checks on the nation, Nigeria was dealt another blow Friday by the latest attack on a crude oil pipeline by Nigerian militants. According to the Wall Street Journal, unknown gunmen attacked a pipeline operated by US oil giant Chevron, forcing the company to cut production by 20,000 barrels a day.
The pipeline sabotage is the second of its kind in the last several months, with the Movement for the Emancipation of the Niger Delta (MEND) taking responsibility for a similar attack in late December. Two days later Shell, a target of the attack, looked to unload its Nigerian assets. Among other political reasons, Shell appears to be tired of the unyielding conflict in the area.
This latest attack could threaten a very shaky amnesty deal established by the government back in October, when thousands of militants turned over their weapons and called a truce. As Nigeria grapples with these issues far from the United States, they are likely to directly affect heating oil and other energy consumers. Attacks like the one on Friday decrease the world’s oil supply, wreak havoc on the industry, and generally end up raising prices here at home.
Saudi Arabia Invests in Future Oil Production and Refining
Saudi Finance Minister Ibrahim al-Assaf. (image: arabnews.com)
As reported Sunday by the Economic Times, Saudi Arabia will invest in oil production and refining to “achieve stability in the international oil markets.” According to the nation’s oil minister, Ibrahim al-Assaf, the goal is to “increase production and refining capacity to maintain balanced and acceptable prices by both producers and consumers.”
It’s a good story, but does it make sense? Saudi Arabia recently completed a huge expansion of its production capacity, bringing it to 12.5 million barrels per day. However, it doesn’t actually pump anything like that—it’s currently producing 8 million bpd, which means it already has more than 50 percent surplus capacity.
Second, Saudi Arabia has so much surplus because it, unlike such OPEC members as Nigeria and Qatar, honors the organization’s production quotas. If the kingdom is voluntarily pumping less than it could, why does it need yet more capacity that—by its past practices—it will not use?
OPEC Maintains Production Targets
OPEC is keeping its production values unchanged for 2010. (image: reuters.com)
At a meeting on Tuesday, the Organization of Petroleum Exporting Countries (OPEC) decided to maintain its production targets for the coming year, a sign that prices are high enough to ensure revenue but not disrupt economic recovery, according to The New York Times. Most of the nations belonging to OPEC—chief among them Saudi Arabia—appeared happy with current oil prices; but other countries expressed concern over the fact that certain OPEC members (like Nigeria) have been exceeding production targets and thereby threatening to reduce prices.
Last year OPEC cut production by 4.2 million barrels a day in order to counteract slipping demand caused by the economic downturn. The maneuver worked; oil prices that had tumbled to as low as $33 a barrel a year ago recovered to $80 this fall. Since then, prices have slid back down to $70 a barrel, in large part because Nigeria and Qatar have ramped up production in recent months while American and European demand has remained weak.
Rising Oil Output Protects Against Crude Price Spikes
A steady flow of crude is a buffer against sudden changes to demand or access. (image: upstreamonline.com)
Last week, militants threatened oil supplies in Iraq and Nigeria, two of the world’s most beleaguered crude producers. Typically, the prospect of conflict in either country, no matter how fleeting, would be enough to trouble the market and create a sizeable spike in global oil prices. This time around, however, crude prices rose only 70 cents, to end the week at a modest $73.36 a barrel, a sign that the oil sector’s growing capacity to shrug off sudden losses in production will, at least for the moment, keep crude prices stable.
According to an article published on Sunday by the Wall Street Journal, several major oil producers have improved production capacity in recent months, ensuring a steady supply of crude despite the occasional disruption. Earlier this year, Saudi Arabia said it increased its production capacity to a record 12.5 million barrels a day, while Qatar will soon ramp up the capacity of its offshore Al Shaheen oil field to 500,000 barrels a day (about three times the current capacity of Iraq).
Tired of Conflict and Instability, Shell Looks to Sell Nigerian Assets
Trying to put out Nigeria’s fires: a burning oil pipeline. (image: smh.com.au)
Sources indicate that Shell is looking to unload its onshore Nigerian assets, the Energy Business Review reports Monday. It appears Shell is looking to sell its interest in oil fields with reserves of 100 billion barrels, valued at $5 billion. Possible buyers include Chinese oil companies Sinopec and China National Offshore Oil Corporation.
The sale appears to be motivated by political and security concerns:
• Political: the Nigerian government seems to be seeking greater control over Western oil development within its borders, as well increasing the amount paid by foreign oil companies to Nigeria
Why OPEC’s “Perfect” Oil Price Could Backfire
Saudi Arabia’s oil minister, Ali Al-Naimi, called oil prices “perfect” but they may breed competition. (image: nytimes.com)
In the world according to OPEC, $75 is the magic number for a barrel of oil. According to Amy Myers Jaffe at the Houston Chronicle, OPEC’s thinking goes like this: seventy-five dollars is enough to maintain investments in difficult-to-reach oil such as deep water and tar sands oil, assures that oil producers can fund national budgets, and allows investors to profit. And since the global economy is currently recovering, albeit slowly, with $75 oil, OPEC figures that $75 is not that damaging to the recovery. American drivers are still driving with $75 oil, and Chinese drivers are buying cars.
But, Myers Jaffe says, this is wishful thinking. She says there are two reasons why $75 is, in fact, too high.
Heating Oil Price Trend for December 21: No Change
(image: welt.de and life.com)
After a tumultuous start Friday morning, oil prices moderated and the price of heating oil ended where it began. News that Iran had entered Iraqi territory and occupied an oil well near the border raised concerns that conflict between the two OPEC members would threaten the world’s supply of oil. However, after causing a surge in the price of crude and heating oil, further reports dispelled some fears and stated that Iran has taken similar action before with little effect. Though worries persist over the border dispute, this weekend’s snowstorm in the US Northeast looks to have a larger impact on this week’s oil prices, especially the price of heating oil.
Today’s average retail heating oil price in the Northeast is unchanged from Friday’s average price.
Pipeline Attack Shatters Fragile Peace in Nigeria
Rebel gunboats in the Niger Delta. (image: aljazeera.net)
All is not quiet in the Nigerian delta, according to an article published on Sunday by AFP.
The Movement for the Emancipation of the Niger Delta (MEND) has taken responsibility for an attack on a pipeline operated by Shell and Chevron. The attack has not been confirmed by any outside sources; however, if this indeed did happen, it marks the end of a shaky two-month truce between the rebel group and the Nigerian government. In an article published in NEXT, an online Nigerian news source, MEND claimed that the attack was a “warning shot” and a sign that hostilities between the two could pick up once again. According to an article published Saturday by Voice of America, MEND launched the attack in response to negotiations for a permanent peace between rebels and the Nigerian government that have been stalled by the absence of President Umaru Yar’Adua. The president is reportedly in Saudi Arabia, receiving medical treatment for a heart ailment.
This situation could increase crude oil prices this week as it threatens worldwide oil supplies. That, along with a blast of snow that hammered the northeastern United States, could mean an increase in heating oil prices.
Analyst Sees Crude Between $65 and $75 for Next Three Months
Neil Atkinson of KBC Market Services. (image: cnbc.com)
In a CNBC video posted on Wednesday, KBC Market Services analyst Neil Atkinson said the price of oil is in for a not-so-tumultuous future, at least in the coming months. Atkinson predicted a fairly stable crude market ahead, saying he thinks the price of oil will loom in the $65 to $75 range for the next three months. Other experts have also been predicting a downturn in crude prices, but many did so with a more dramatic outlook.
The Wall Street Journal’s Liam Denning gave his forecast earlier this week, calling for a significant drop in crude prices in the next decade as production—especially in emerging oil markets like Brazil and Nigeria—ramps up. While Denning’s prediction is more long term—and focuses on big-picture changes in global oil supply and demand—Atkinson sees stability in the immediate future, and thinks price stabilization will happen in part because demand estimates from emerging markets like China and Latin America have been too high.
Oil Supply Could Lower Oil Prices in Next Decade
WSJ logo. (image: mclaughlinquinn.com)
In a video on the Wall Street Journal digital version, columnist Liam Denning explains that the next decade will not belong to the oil bulls but, rather, the oil bears. The big shift in the market, according to Denning, will be in supply.
The story of oil in the past decade is linked to the intense demand from emerging markets like Brazil, India, Russia and China. Demand from the BRICS, as this collection of countries has been dubbed, in conjunction with political unrest—ranging from the war in Iraq to the national turmoil that besieged Nigeria—worked to, as Denning put it, “keep barrels off the market.”
But the days of high demand and low supply are over, he says. Looking ahead, the so-called BRINK countries—Brazil (now the 15th largest producer of oil in the world), Russia, Iraq, Nigeria and Kazakhstan—could increase oil production earlier than expected and this could bring down the price of oil as more crude flows into the market.
