Saturday, June 20, 2015

Nigeria -- June 20, 2015


August 25, 2015: tweeting at the noon-hour -- Nigeria's Buhari approves termination of controversial crude oil swap for refined oil products contracts with trading companies, NNPC says; the background --
The NNPC currently swaps a part of its allotted 445,000 barrels of crude per day to some oil companies and in return receives refined products. 
Oil swap derives from the fact that Nigeria’s four refineries operate mostly below 50% installed capacity and since 2003, the NNPC has continued to allocate them 445,000 barrels of crude oil per day, which corresponds to 100% capacity. 
The oil swaps have come under criticism following allegations that they have been opaque and the government has been short-changed in the deals. In its audit between 2009 and 2012, the Nigerian Extractive Transparency Initiative (NEITI) revealed that crude oil swap arrangements are not cost- effective, especially when compared to product prices and proceeds paid to the NNPC. 
And, so, the new president scrapped the swaps. Again, look at what was going on:
  • the country's refineries had a total capacity of 445,000 bopd
  • the refineries were only operating at 50% capacity (official number; reality, probably worse): 225,000 bopd
So, where was the delta going? Each day about 225,000 barrels of crude oil was unaccounted for. Technically, Nigeria just took 445,000 bopd off the global market but, of course, that ain't happenign either.

June 20, 2015: late this evening, looking at the most recent issue of The Economist, I see Nigeria is not only the cover story, but the story is covered in a 16-page tear-out special report. I scanned through the bit on Nigeria's oil and terrorism is barely mentioned. I don't believe the Cairo speech was mentioned anywhere in the 16-page special report. My hunch: historians are not going to treat "The New Beginning" speech very well; it certainly is not a "four-score-and-seven-years-ago-speech" although it might have been a "forty-centuries-after-the-Great-Flood" speech.

First, before we get started, for Willistonites, this flashback, too good to miss. I have it archived; I assume some day the story at the link will be lost/archived and available only by subscription.

Pardon the interruption. Now back to the Bakken. 

This is the BloombergBusiness headline: Shale Fallout Torments Nigeria as Flagship Oil at Decade-Low.

The lede:
The shale boom that’s reduced U.S. dependence on overseas crude is reverberating in Nigeria as Africa’s biggest oil producer cuts the pricing for its flagship grade to the lowest in a decade.
The country, part of the Organization of Petroleum Exporting Countries, will sell July supplies of its Bonny Light crude at 23 cents more than Dated Brent, according to an e-mailed statement from state-run Nigerian National Petroleum Corp. That’s the smallest differential since 2005 and compares with a 50 cent premium in June and $2.55 a year earlier.
I told the reader who sent me the link:
I saw that article last night. I wrote a piece on it but then decided to delete it. I guess I will go back, re-write it. The problem I had with the Bloomberg article was the long term data suggested Nigeria's problems started BEFORE the surge in US oil production and in the last six months (October to March, most recent month available) the data didn't support the headline in recent events, although overall, yes, Nigeria is in huge trouble (another really bad grammatical sentence).
Nigeria could easily go by the wayside in the big scheme of things. The problem is they can give their oil away, just like Saudi is doing, but they need cash flow to pay outside companies (mostly US, I assume) to drill. 
Maybe I'll just post the data and the story and not comment. Wow, that would be tough for me. Not to comment.
The most frustrating thing is how "old" the data is. This is the six-month look-back from EIA but note that the most recent data was through mid-March, 2015. Frustrating. Hardly real-time. (US car manufacturers get their sales data out one business day after the end of each month. One knows that the US government has this data in real-time. I wonder how many government employees with this data invest in the oil and gas industry?)

The "oil world" changed in October, 2014. That's the "official" month when historians will say the "bottom fell out." And, so what happened between October and March, the most recent date data is available? Nigeria had one of its best months in the past six. But it is the long-term data that tells the story.

Although the six-month data above doesn't support the Bloomberg story line, the graph below certainly might:

According to the linked article:
The U.S. has bought an average 30,000 barrels a day of Nigerian crude this year, data from the Energy Department show. It shipped almost 1 million barrels a day from the African nation in 2010.
I agree 100% that the Saudi decision turned the world upside down, the decision that changed the world, but that was in October, 2014, well after the Nigerian slide.

The problem I have with the Bloomberg article is this: the data above suggests Nigeria's problems began BEFORE the tight oil boom in the US was making any real difference. Remember: contracts for international oil are made at least six months in advance, some a year earlier, some perhaps longer, on a rolling basis. The import data above certainly trails, at least by six months, decisions made by US refiners from where to get their oil.

Everyone will have their own opinion, but I feel pretty comfortable saying that the US shale oil boom didn't really start to affect "things" until late 2013. The Bakken was not the "only game in town" by 2013, but the Bakken had the head start and was the barometer of what was going on in the US shale oil industry in 2013. Although Texas (Eagle Ford and Permian) eventually caught up with the Bakken, the fact remains that the Bakken remains a very, very nice barometer for US shale oil for any number of reasons. What happens in the Bakken, reflects the entire US onshore oil industry. I'm getting off-track.

Back to late 2013. Back in August and September, 2013, the Bakken had not even reached the 1 million bopd threshold. The Bakken did not hit 1 million bopd until six months later (an eternity in this business) until April, 2 014.

I remember pundits suggesting that as much as the Bakken is doing, it was but a drop in the oil bucket compared to entire US production, and a micro-drop in the global oil bucket. And yet, by late 2013, and then going back six months when decisions were being made, Nigeria's slide in crude oil imports into the US were well off their records, experiencing a steep decline. 

North Dakota has gone in less than eighteen months from "the Bakken is producing, on a percentage basis, very little oil compared to the rest of the world, " to "the Bakken is the reason that Nigeria is about to implode."

Call me naive, but I think there's a lot more going on with regard to Nigeria. Nigeria's slide began well before the Bakken "caught on."  

Note: in the graph above, I use the word "recession" in a very loose sense. Certainly the US economy was in recovery by then according to some, but the recovery certainly didn't feel very strong. (This past week, Janet Yellen said that the economy was not yet strong enough to handle even the slightly for Fed interest rate increases.)

It would be interesting to get a breakout of Nigeria's oil, what type it is, whether it's the kind the US needs, how it compares with/competes with US shale oil. Note that the article refers to Nigeria's "flagship oil." How much "junk oil" is being taken off the market by the production of Bakken "really, really good oil." I assume there is dirty oil and really dirty oil, just like dirty coal and clean coal.


Compare the Nigerian chart above with two other OPEC countries, Ecuador and Venezuela. Ecuador is pretty low on the totem pole when it comes to US imports, but it is what it is, and it certainly did not get "hit" by the US shale revolution as much as Nigeria supposedly did; in fact I see no relationship:

Perhaps a more relevant example would be from Venezuela, the country that agrees with Iran that the US is the Great Satan:

Although Venezuela imports into the US are off their highs, the decline is certainly nothing compared to what Nigeria is experiencing. In fact, if one agrees that the Bakken was not at high tide until late 2013, the Venezuelans have experience no change. [It's interesting to note that Venezuela's "gentle slide" began in 1998, long before anyone even knew the Bakken could be productive.]

Later this week, we should see a BloombergBusiness article with this headline: Despite the Ferocity of the Bakken, Venezuela As Strong As Ever.

One wonders, if Hunter S Thompson were still alive and if he followed the Bakken would have had this to say:
So now, less than five years later, you can go up on a steep hill in [Minot] and look West, and with the right kind of eyes you can almost see the high-water mark [of the Bakken]—that place where the wave finally broke and rolled back.”

[It's interesting to note that Venezuela's "gentle slide" began in 1998, long before anyone even knew the Bakken could be productive. One wonders if there might be other factors that explain Nigeria's situation? My hunch: "ineptness" is somewhere near the top of the list. Even Venezuela was able to maintain an oil trading relationship with the US despite the latter being described by the former as The Great Satan.]

Pulp Fiction

Strong language at the beginning:

Misirlou, Pulp Fiction

I'm in my Pulp Fiction phase. The phase won't last long, probably a few days. David Lynch is really good, but Quentin Tarantino is able to do what David Lynch often has trouble doing: connecting the chapters into a coherent story.

Both of them really, really enjoy incorporating "classic" music into their movies.

Until tonight (June 20, 2015), I did not know (unless I forgot) Steve Buscemi has an uncredited cameo in Pulp Fiction.

So Much To Write, So Little Time

I'm still going back to Armand Marie Leroi's The Lagoon: How Aristotle Invented Science.

I skimmed through the book several months ago; it seemed promising but I was not ready to read it.

Starting over, beginning again, a few weeks ago, I began to read very, very slowly, but by the time I was about half-way through, I decided to complete it quickly using speed-reading techniques that are a poor excuse for those who want to enjoy good writing. Whatever. 

So, I finished the book. Now I am going back to re-read the parts that need to be re-read. I assume there are much better books on the life of Aristotle, and I'm sure wiki provides an incredibly good snapshot, but for me I can honestly say that one will have a very, very good feeling for Aristotle after reading Leroi's "biography." 

As important as Aristotle was, or must have been, I've always wondered why I knew so little about him. I graduated from a great high school and a great liberal arts school; along the way I did a lot of independent reading. Along the way, from 2002 to 2007 I engaged in an aggressive reading program and yet there was a gap with regard to Aristotle. I even had a drawing of a make-believe cocktail party in which all the literary greats, dead and alive, had gathered. It was a great drawing; I hope I can find it. I don't remember where Socrates/Plato were standing/sitting at the party, and I don't even recall if Aristotle was there, but he must have been.

I do recall that Shakespeare was near the center of the party, but I know I never placed Sir Henry Neville sitting on the divan within earshot of the group around his factotum. At the time of the drawing I had not heard of Sir Henry.

So, back to Aristotle, and Leroi, page 353:
The anachronism explains all. Peter Medawar's abuse was aimed not at Aristotle the father of science but at Aristotle its greatest foe. He was, indeed, re-enacting, for a new generation, the origin myth of modern science; the myth in which Aristotle was the giant who had to be slain so that we could pass through the straits of philosophy to reach the open sea of scientific truth that lay beyond; the myth in which Aristotle is little more than an endlessly fecund source of empirical, theoretical and methodological error; the myth that explains his absence from the scientific pantheon next to Linnaeus, Darwin, and Pasteur; the myth that explains why not one scientist in a thousand can name, much less articulate a single result from, his scientific works. I say it is a myth and, insofar as history matters at all, it is certainly a pernicious one for it omits all that we owe him. But it is a myth that has this much truth: that Aristotle's science was the principle casualty of the Scientific Revolution. It may even be said that modern science was built on its ruins.
Teacher of the year, North Dakota, 1969, the year I graduated from high school. Kristian Monson was one of the best teachers I ever had. 

Other links to Mr Monson:
They Really Do Speak Another Language

In today's WSJ, an essay/book review by Laura J. Snyder. The book is not particularly important (to me; I doubt if I will read it). However, the essay was excellent "explaining" how English became the language of science.

Ms Snyder noted that "by the 1930s German scientists were leading the way in a new field, quantum physics." I assume she is correct but she should have added Hungarian scientists also.

I also enjoyed the short history of the controversy behind the "inventor" of the periodic table, whether it was the Russian Dimitrii Mendeleev or the German Lothar Meyer. We all now how that turned out but I did not know the backstory.

The best part: Ms Snyder mentioned only a few names but one she did mention was Lisa Meitner, a German physicist and "the first scientist who would be the first to understand the portentous fission of uranium." [See The Age of Entanglement: When Quantum Physics Was Reborn, Louisa Gilder, c. 2008, p. 138.

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