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August didn't start well for the West African crude oil
producer. Nigeria Union of Petroleum and Natural Gas Workers
(NUPENG), one of the country's main trade unions came close to
industrial action last week, over a staffing dispute with Chevron.
NUPENG had accused the US oil major of dismissing hundreds of
Nigerian workers and altering contracts. The union was ready to
proceed unless all "NUPENG executives" returned to work within
seven days. However, the union suspended its plan after talks with
the state oil company.
Meanwhile, the Nigerian National Petroleum Corporation (NNPC)
commented that investment decisions in oil projects in Nigeria have
become increasingly difficult, mainly due to the current fiscal
regime. Several investors have recently opted for other producing
countries, realizing the risks faced in any Nigerian project. NNPC
focus on growing national oil reserves, targeting 40 billion
barrels by 2025, with crude oil production targeting three million
b/d. But these scenarios assume that required investment will be
attracted, which hasn't proved to be an easy task so far. Africa's
largest oil producer is relying heavily on crude sales for its
income, but meanwhile imports most refined fuel it consumes.
NNPC has been planning to review its payment structure for
energy joint ventures to financially support projects that
typically struggle to secure contributions from the Federal
Government. This will allow these entities to raise capital through
equity or debt. This could dramatically improve terms for
investors, who have been rarely paid on time in the past. Chevron,
ExxonMobil and Shell have been some of the company's joint venture
partners.
Focusing on trade flows, as depicted in IHS Markit Commodities at Sea,
Nigerian crude oil liftings have strengthened further during the
last couple of months, with July's levels having approached 2,100
thousand b/d. This is only a marginal increase of 1%
month-on-month, but quite dramatic since July 2018, with volumes up
by more than 10% year-on-year for July and around 8% for the first
seven months of 2019. Europe has been absorbing about 46% of
Nigerian barrels since early 2019, with India importing almost 18%,
while another 14% has ended up in other destinations across Africa.
It is also interesting to note that the US has been increasing
imports from the West African country since June.
Posted 07 August 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
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