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Sunday, January 27, 2013

NIGERIA - Excess Crude Account's Growth

author thomas ramseyer
Nigeria: Excess Crude Account Not Growing Enough, Okonjo-Iweala, Minister of Finance and the coordinating Minister of Economy

Nigeria's Excess Crude Account is not growing as it should because of bunkering activities in the Niger Delta
Remark: The Excess Crude Account's growth is based on oil prices ralized as well as the volume of oil output.

Dr. Ngozi Okonjo-Iweala says that oil bunkering is affecting revenue projection for the year.

Remark: Oil bunkering is affecting revenue projection only because the said bunkering is not included. As bunkering has emerged since the price spread between Brent (Bonny Light) and WTI widened two years ago, it has been predictable. It is naive to not take this activity into consideration when budgeting.

The Excess Crude Account has risen from $3.6 billion last month to $4.2 billion currently. Minister said the balance in the account should be higher because price of oil at the international market is rising.

Remark: When estimating the excess account's growth following formula is applicable: (bbl-output * price of Brent oil * 83%)-(bbl-output * benchmark price)

This is a time of high oil prices and we should be expecting more in the Excess Crude Account.
Remark: What is she talking? Does she want to teach people arithmetics?

The Nigerian National Petroleum Corporation reported that as at April, it lost 17 percent of output to bunkering.

Remark: where does NNPC get its information from? The bunkering must be going on right at the pump

It was reported that a boat was caught carrying about 1.3 million barrels of oil illegally. 
Remark: the aforesaid boat is to be considered sacrifice for the sake of news. The bunkering supposedly is taking place on a regular basis meaning that all of the tankers are loaded by roughly 20% more oil than billed.
For bunkerin 1.3 Million bbl which are 2
06000 tons there is Very Large Crude Carrier (VLCC) or Ultra Large Crude Carrier (ULCC) needed. To do this facilities such as on Bonny Island are needed. 206000 tons on one carrier is big time bunkering protected by a sophisticated network infiltrated in the Nigerian upstream oil business.

  • 160,000–319,999 DWT:   Very Large Crude Carrier (VLCC)
  • 320,000–549,999 DWT:   Ultra Large Crude Carrier (ULCC)
Government's oil output projection was 2.5 million barrel per day for the year 2012.
Remark: Thus bunkering counts for some 425'000 bbl/day.

One fifth of production missing to bunkering certainly affects revenue projection.

Remark: (153'000'000 bbl/year or USD 17'136'000'000 per year or NGN 2'690'532'270'000 per year)

Nigeria just needs people to stop bunkering says the minister.
Remark: Nobody will believe that 425'000 bbl/day are stolen off pipelines. This just is a farytale to mislead ignorant people in NIgeria as well as all over the world. The minister is just looking like never having stepped one foot out of her airconditionned environment to visit e.g. Bonny Island to check on procedures and workflows.

To stop bunkering Okonjo-Iweala  in the first place must understand bunkering. It is too easy to blame some activators in the Delta Region.
When looking at the market conditions - Brent trading far above WTI - it is evident tht Nigeria since quite some time would not have been able to sell its oil in the world markets. Nigerian Oil-contracts outline that a certain amount of oil is to be sold on a monthly bases at the brent oil market price of the delivery date. Common sense says that NOBODY is buying oil at a price trading systematically USD 10 to USD 20 above WTI. Oil companies considered Bonny Light (tagged to Brent because of its similar quality) too expensive since the spreadwidening started in 2010.
SEE possible TRUTH
As the example below is showing bunkering may be used to offset the pricespread Brent/WTI by simply bunkering the price difference on top of each load in form of additional barrels of oil not stated on the bill.

E.g. Billing 100 bbl at USD 112 equals 117 bbl at USD 95.7

Thesis to work around Brent/WTI-Spread

copyright thomas ramseyer