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How Events in Syria Affect the Global Oil Markets
By James Hamilton | The growing likelihood of U.S. military action in Syria seems to be one factor in the recent sharp rise in oil prices.
That is not because Syria itself is an important producer of oil. According to the EIA, the country was producing less than 370,000 barrels a day in 2010, only half a percent of the world total. Civil unrest and an embargo had brought that down to 71,000 barrels this May, less than 1/10 of 1% of global supplies. If that goes too, nobody but the Syrians will miss it.
But the question is whether conflict would be neatly contained within Syria. The situation in Egypt, for example, remains quite unstable, and it would not take much to set it off again. Egypt is also a relatively minor contributor to world production. But the Suez Canal and Summed pipeline together transport 3.5 million barrels of crude petroleum and refined petroleum products through Egypt each day, a number that would correspond to 4.6% of total world field production of crude oil.
Related article: Tight Global Oil Supplies Turn Syria into an International Problem
Libya may already be tipping. The country was producing 1.9% of the world’s total last May, but worker strikes and armed occupation of energy infrastructure may have brought the country’s recent production down to 250,000 b/d.
Iraq currently produces 4% of the world total and is a critical component in many analysts’ scenario for how world production will continue to grow over the next few years (some of which extra production had been intended for planned pipelines through Syria). But dozens of people are being killed daily in Iraq’s violence. And the Wall reported this information on Friday:
The U.S. has intercepted an order from Iran to militants in Iraq to attack the U.S. Embassy and other American interests in Baghdad in the event of a strike on Syria, officials said, amid an expanding array of reprisal threats across the region.
Saudi Arabia backs action against Assad, so the kingdom might try to increase production to offset losses from the above possibilities. But how much the kingdom is able to do, even if it is willing, is not clear. More importantly, Syria is part of a broader struggle between Saudi Arabia and Iran. If events were to lead to disruptions in either of those countries, the effects on oil markets would be quite dramatic.
Related article: Looking for the Next Mega Oil Play
To put these numbers in perspective, the table below summarizes the major geopolitical disruptions in oil-producing countries over the last 40 years. The Libyan disruptions two years ago took about 2% of world production offline, and were associated with a 20% increase in crude oil prices. The combined effects of strikes in Venezuela and the Second Persian Gulf War in 2002-2003 took away 4% of global production, and oil prices were up 35% at the highest point. Neither of those events was associated with significant downturns in the world economy.
On the other hand, the first four events listed above took out 6-9% of world production. These were accompanied by oil price spikes of 50% or more, and each of these was followed by a global economic recession.
Of course, another possibility is that the world will become a safer, more stable place if the U.S. launches a few cruise missiles on Damascus.
By. James Hamilton
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Crude Oil Lifting Contracts: Names of 36 Beneficiaries Revealed
Crude Oil
Ejio for. Alike
The provisional names of the 36 companies that were awarded contracts to lift crude oil by the Federal Government through the Nigerian National Petroleum Corporation (NNPC) from June 1, 2014 to May 31, 2015 have been revealed. Although the list is not final as more companies are expected to make the final list, it signals a paradigm shift to indigenous companies as against previous preference for foreign companies. The final list may contain more local names according to a reliable source.
The list, which was obtained exclusively by THISDAY, comprises 21 indigenous companies; eight international oil traders; two foreign refineries; two subsidiaries of the NNPC and three countries, represented by their state-owned National Oil Companies (NOCs).
According to the document, 21 indigenous companies were awarded contracts to lift a total of 630,000 barrels per day of crude oil during the one-year period, representing 57 per cent of the 1,179,000 barrels per day awarded to the 38 beneficiaries.
The list also showed that eight international oil traders got an allocation of 240,000 barrels per day, representing 20.5per cent of the whole allocations, while two foreign refineries got 60,000 barrels per day, or 5.1per cent of the allocations.
Two subsidiaries of the NNPC were awarded contracts to lift 90,000barrels per day, which translates to 7.7per cent, while three countries, represented by their NOCs also got 90,000barrels per day.
A breakdown of the allocations showed that each of the 21 indigenous traders got an allocation of 30,000barrels per day.
These companies include; A-Z Petroleum Products Limited; Hyde Energy Nigeria Limited; DK Global Energy Resources Limited; Aiteo Energy Resources,; Avidor Oil and Gas Company Limited; Azenith Energy Resource Limited; Barbados Oil and Gas Services Limited; Century Energy Services Limited and Crudex International Limited.
Other beneficiaries include, Eterna Plc; Bono Energy; Taleveras Limited; Mezcor SA; Sahara Energy Resources Limited; Tridax Energy SA and Tempo Energy SA.
The rest include, Ontario Trading SA; Voyage Oil & Gas Limited; Elektron Petroleum Energy and Mining Limited; Ibeto Petrochemical Industries Limited and Emo Oil and Petrochemical Company.Also included in the list are eight international oil traders, which got an allocation of 30,000 barrels per day of crude oil each.
They include, Addax Energy SA; Elan Oil Limited; Mercuria Energy Trading SA; Springfield Ashburton Limited; Petro/Ietnam Oil Corporation (PV Oil); Sullum Voe; Vitol SA and Delaney.Two foreign refineries – Fujairah Refinery Limited and PTT Public Company Limited received an allocation of 30,000bpd each; while two subsidiaries of the NNPC – Duke Oil and Calson were awarded 30,000bpd each.
The NNPC also entered into bilateral commitments with the Republic of Malawi; SINOPEC of China and Indian Oil Corporation Limited, with each of these entities receiving 30,000bpd.The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke said recently that the government deliberately favoured indigenous companies as part of the efforts to encourage local participation in the oil and gas industry.
The Minister, who is also the chairman of the NNPC Board, confirmed that over 60 percent of the 2014 to 2015 annual term contracts for the lifting of Nigeria’s crude oil were awarded to local firms.
“When we unveiled the Nigerian content law a few years back, the overriding principle was to grow indigenous capacity in an aggressive manner and I am happy to report that today, in the oil and gas sector, Nigerian content has been placed on the path of irreversible progress,” she said.
An energy expert who wants anonymity, praised the deliberate emphasis on indigenous companies stating that ‘‘Increasingly, local Nigerian companies have become more assertive more ambitious, more resilient and aggressive in their business preposition.
No where is this more on evident than the oil and gas sector and more recently, the power sector which have seen local indigenous companies in partnerships with foreign companies bid big and win big. It is essentially a sign of the growing assertiveness of the young entrepreneurial Nigerians that are clearly unafraid to take risk. And more than that, the opportunities the local content law has opened Nigerian companies to are unparalleled. Nigerian are rising,’’ he stated
He added the federal government, especially the Petroleum Minister deserve commendation for this bold initiative. It is important that we appreciate what the Minister has done, by empowering local players to build capacity for even higher undertaking, he declared.
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