Tuesday, August 25, 2015

Shell Game -- 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 happening either.

I track Nigeria here when I run out of things to do. Algeria here. Angola here

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