Oil & Gas

U.N. exposes failures and corruption in Nigeria’s oil spill cleanup

In 2021, as a satellite passed over the Niger Delta, it captured images of vast swathes of barren land. The site, located outside Port Harcourt, was part of a cleanup project listed by the United Nations Environment Programme (UNEP), aimed at restoring the area to its former state as green farmland. This was supposed to reverse the damage caused by decades of oil spills, which had transformed the Delta into a symbol of environmental degradation. However, instead of being rejuvenated, the land had become a desolate “moonscape,” deemed unusable for agriculture, according to U.N. documents. It wasn’t an isolated failure. A series of newly uncovered investigations, emails, letters to Nigerian ministers, and meeting minutes reveal a pattern of mismanagement and poor execution. Senior U.N. officials described the Nigerian cleanup agency, the Hydrocarbon Pollution Remediation Project (HYPREP), as a “total failure.” The agency’s selection of cleanup contractors came under heavy criticism in a U.N. review, which found that many of the firms hired lacked relevant expertise. The cleanup effort was further marred by shoddy practices: soil samples were sent to laboratories that lacked the necessary equipment to conduct the required tests, and auditors were physically obstructed from verifying whether work had actually been completed. The cleanup companies were often linked to powerful Nigerian politicians, a former Nigerian environment minister told the AP. U.N. officials shared similar concerns, pointing to the cozy relationship between political elites and contractors, which contributed to the project’s failures. The situation was supposed to be different. The Niger Delta has experienced thousands of oil spills since oil production began in the 1950s. Studies and reports have shown that local communities often use contaminated water for drinking, washing, and cooking, exacerbating health and environmental problems. Despite a 2011 U.N. survey that highlighted the severity of the pollution, spills continue to occur regularly. In November 2023, for example, the Ogboinbiri community in Bayelsa State suffered its fourth spill in just three months, devastating fields, streams, and fisheries. “We haven’t harvested anything,” said farmer Timipre Bridget. “There’s no way to survive.” Following the 2011 survey, oil companies, including Shell—the country’s largest private oil and gas firm—agreed to contribute $1 billion toward cleaning up the worst-affected area, Ogoniland. The U.N. was relegated to an advisory role, while the Nigerian government took charge of managing the funds. But an internal investigation by U.N. scientists last year revealed that cleanup efforts outside Port Harcourt had been abysmal. The site was left without topsoil, with nearly seven times the petroleum contamination allowed by Nigerian health standards. The company responsible for the cleanup had its contract terminated, according to Nenibarini Zabbey, the current director of HYPREP. However, Philip Shekwolo, who was in charge when the contract was awarded, rejected the allegations. He dismissed the U.N. documents as “baseless” and “cheap blackmail,” insisting that the cleanup had been a success. Yet U.N. officials had raised concerns about the process as early as 2021, when Shekwolo was acting chief of HYPREP. A U.N. review in January 2022 found that 21 out of 41 contractors approved for cleanup work had no relevant experience. Some of these companies were simply construction firms or general merchants, according to meeting minutes. U.N. Senior Project Advisor Iyenemi Kakulu described the situation as effectively handing contractors a “blank check,” while Hyprep’s own communications chief, Joseph Kpobari, acknowledged that incompetent firms were responsible for the poor cleanups. Yet, these same firms were awarded contracts for more polluted sites, according to U.N. documents. Zabbey defended HYPREP’s record, claiming that 16 out of 20 sites in the first stage of the project had been certified as clean by Nigerian regulators. He also insisted that the agency followed proper procedures when issuing contracts. However, two anonymous sources familiar with the cleanup efforts told the AP that when officials visited laboratories used by HYPREP, they found that these labs lacked the necessary equipment to perform the required tests. In a letter to its customers, a U.K. laboratory that frequently worked with HYPREP admitted that many of its tests in 2022 were flawed and unreliable. The U.K. laboratory accreditation service even confirmed that the lab had been suspended twice during that period. Zabbey, however, claimed that HYPREP now closely monitors contractors, ensuring that laboratories adhere to Nigerian and U.N. standards and are regularly inspected. In 2021, the U.N. raised further alarms about HYPREP’s financial management, warning that the agency’s spending was not being tracked. Internal auditors faced strong resistance and were “demonized for doing their job,” according to the U.N.’s assessment. HYPREP’s previous leadership had actively obstructed audits, even physically preventing auditors from verifying whether work had been completed. Zabbey responded by claiming that the audit team is now valued, and financial accounts are audited annually. However, he only provided one audit cover letter, which acknowledged “weaknesses” in HYPREP’s financial management. One Nigerian politician, Sharon Ikeazor, attempted to bring about change. A lawyer by training, Ikeazor served as environment minister in 2019 and quickly recognized the depth of the problem. “The companies had no competence whatsoever,” she said in a phone interview. In February 2022, she received a letter from senior U.N. official Muralee Thummarukudy, warning of “significant opportunities for malpractice” in the contract awarding process. This was unusually strong language in U.N. diplomatic circles. Ikeazor removed Shekwolo from his position as acting HYPREP chief the following month, citing concerns that he was too closely tied to political interests. Shekwolo’s connections to politicians, many of whom owned cleanup companies, were well known, Ikeazor said. She explained that the few competent firms in the sector were excluded from major contracts, while the politically connected companies dominated. Shekwolo’s former employer, Shell, and the U.N. had both warned her about his involvement in the cleanup effort. Ikeazor’s decision to review and investigate the contracts sent “shockwaves” through Nigeria’s political class. She was quickly removed from office, with Shekwolo reinstated just two months later. Shekwolo denied any undue political influence in his work, insisting that his removal had no explanation and was merely a result of personal dislike from Ikeazor. In 2023, the U.N. officially ended its involvement in the Nigerian oil spill cleanup, citing the completion of its five-year consultancy agreement. However, Ikeazor and two other sources familiar with the project believe that the real reason for the U.N.’s exit was frustration over rampant corruption. Zabbey contended that the U.N.’s departure was simply a matter of the organization shifting its focus and moving on from the project.

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Oil markets remain closed on Christmas

 The majority of global markets remained closed on Monday due to the Christmas holiday break. The international oil benchmark of Brent crude increased by 1.3% to $73.58 per barrel on Tuesday, up from the previous session’s close of $72.63. The US benchmark West Texas Intermediate also rose by 1.2% to $70.10 per barrel, compared to $69.24 at the close of the prior session. Until the holiday, both benchmarks rose with stronger US economic growth data and expectations that global economic activity will drive oil demand upwards. Also, the US Federal Reserve (Fed) is expected to further ease its policy following lower-than-expected US inflation data. US stock markets closed early on Tuesday and will remain closed on Wednesday. Likewise, European stock markets had a half-day on Tuesday and will not trade on Wednesday. Hong Kong markets are also closed on Wednesday and Thursday, while South Korean markets remained closed on Wednesday.

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Iran struggling to tackle energy crisis despite vast oil reserves

 Iran is grappling with an energy crisis amid the cold winter weather, with many factories and government offices in some cities closed or operating with reduced hours while schools are switching to distance learning. The oil-rich country is suffering from an energy crisis due to sanctions, which have led to a lack of sufficient investments in its energy infrastructure. Power outages in industrial and residential areas and shortages of energy supply, especially in the winter, have caused economic and social issues. Electricity and natural gas outages have become commonplace in Iran due to rising energy demand coupled with inadequate infrastructure. Iranian President Masoud Pezeshkian recently appealed to the public to turn their thermostats down by 2C (3.6F).  Energy Minister Abbas Aliabadi called on the public to reduce fuel consumption to provide more fuel to power plants to minimize problems with energy supply. All levels of education were suspended in December in several Iranian provinces. Iranian Vice President for Executive Affairs Mohammad Jaafar Ghaempanah said on Dec. 17 that factories and workshops in some industrial zones had halted operations due to the lack of natural gas, noting that despite the country’s demand of 945 million cubic meters, only 840 million cubic meters had been produced. Most of Iran’s electricity needs are met by thermal power plants using natural gas, resulting in a deficit of around 15,000 megawatts during peak demand, according to Tejaratnews. Around 94% of Iran’s electricity is produced from fossil fuels. As for clean energy, while the world’s share of wind and solar energy is around 13% of the total electricity generated globally, Iran’s share is at 0.6%. A significant reliance on natural gas, lack of technological advancements and outdated infrastructure negatively impact renewable energy development efforts, leading to energy losses and causing significant damage to the national economy. Iran’s energy inefficiency leads to higher costs and renders its electricity grid unreliable. Estimates suggest that power outages in the country could cost the economy $5 billion to $8 billion annually.  Iran aims to increase its renewable energy capacity to approximately 30 gigawatts by 2030, aiming to significantly expand its use of clean energy sources like solar and wind power, but financial difficulties and economic sanctions are affecting the inflow of foreign investments and the development of advanced technologies.  Russia boasts the largest proven natural gas reserves in the world at around 47 trillion cubic meters, while Iran has the second largest reserves at around 34 trillion cubic meters, according to the US Energy Information Administration.

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Nigeria: 15 illegal oil refining sites have been destroyed

In Nigeria, a country rich in oil and natural gas, 15 illegal refineries processing stolen crude oil have been destroyed. Danjuma Jonah Danjuma, Acting Director of Army Public Relations, announced in a written statement that the military conducted aerial operations against oil smugglers in the Niger Delta, the nation’s oil-producing region. He reported the destruction of 15 illegal refining sites and the seizure of 11 tankers carrying oil, along with several boats. Additionally, 115,000 liters of stolen crude oil were recovered. Oil theft in Nigeria is negatively impacting the country’s economy. Nigerian Senator Ned Nwoko has stated that due to increasing oil theft and attacks on pipelines, the country has suffered losses exceeding $3 billion in 2023. Nigeria’s proven oil reserves are approximately 37 billion barrels, accounting for 3.1% of global reserves. Ranked among the top 15 countries in crude oil production, Nigeria is the 8th in the world for oil reserves and 6th in oil exports. In the Delta region, where oil fields are located, armed groups are involved in sabotage, conflicts, and kidnappings related to oil operations.

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Nigeria has started selling crude oil in its local currency.

Nigeria, a country rich in oil and natural gas, has begun selling crude oil in its local currency, the naira. Mohammed Manga, the Director of Information and Public Relations at the Ministry of Finance, stated that this initiative follows a directive from the Federal Executive Council (FEC). Manga highlighted that this strategic move is anticipated to have a significant and lasting effect on Nigeria’s economy by promoting growth, stability, and self-sufficiency. He also pointed out that Nigeria is navigating the complexities of global markets, positioning itself for future success with this approach. Nigeria’s proven oil reserves stand at approximately 37 billion barrels, representing 3.1% of the world’s total reserves. As one of the top 15 crude oil producers globally, Nigeria ranks 8th in oil reserves and is the 6th largest exporter of oil.

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China discovers ‘ultra-shallow’ gas field in South China Sea

China has claimed discovery of ‘ultra-shallow’ gas field in South China Sea, state-run media reported on Wednesday. China National Offshore Oil Corporation (CNOOC) said the original gas in place (OGIP) of the Lingshui 36-1 gas field — the world’s first large, ultra-shallow gas field in ultra-deep waters — has been estimated at more than 100 billion cubic meters, Xinhua News reported. According to the company, the relevant authorities have approved the data. CNOOC also estimated that the OGIP of the Yinggehai, Qiongdongnan and Zhujiangkou basins in the South China Sea is more than 1 trillion cubic meters.

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Oil up amid growing geopolitical conflicts in Middle East

 Oil prices increased on Thursday amid growing tension in the Middle East following the assassination of Ismail Haniyeh, the head of the Palestinian Hamas group’s political bureau, and positive demand outlook in the US, supported by inventory data from the Energy Information Administration (EIA). International benchmark Brent crude traded at $81.44 per barrel at 10.13 a.m. local time (0713 GMT), a rise of 0.74% from the closing price of $80.84 per barrel in the previous trading session. The American benchmark West Texas Intermediate (WTI) traded at $78.33 per barrel at the same time, a 0.53% increase from the previous session that closed at $77.91 per barrel. Haniyeh was killed in an Israeli airstrike on his Tehran apartment the day after attending Iranian President Masoud Pezeshkian’s inauguration, according to announcements made by Iran and Hamas on Wednesday morning. Though Israel has remained silent about Haniyeh’s death, Prime Minister Benjamin Netanyahu has hinted at Tel Aviv’s involvement in his assassination. Escalating geopolitical tensions in the regoin, home to a vast majority of global oil reserves, despite cease-fire negotiations, supported upward price movements by increasing supply risk in the markets. Meanwhile, data indicating a drop in crude stocks in the US, the world’s largest oil-consuming country, lent support to crude oil prices by suggesting that oil demand was increasing. According to data released by the EIA late Wednesday, US commercial crude oil inventories decreased by 3.4 million barrels to 433 million barrels during the week ending July 26. The drop in inventory was well above the market prediction of a 1.6 million barrels fall. However, the rise of the US dollar against other currencies limited further price rises. Strong dollar ramped up prices for non-US currency holders and discouraged investors. The US dollar index rose by 0.09% to 104.18 at 9.58 a.m. local time (0658 GMT), compared to the previous trading session.

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Oil up over fears of widening conflict in oil-rich Middle East

Oil prices increased on Monday over fears of a widening conflict in the oil-rich Middle East. International benchmark Brent crude traded at $80.67 per barrel at 09.51 a.m. local time (0651 GMT), an increase of 0.49% from the closing price of $80.28 per barrel in the previous trading session. The American benchmark West Texas Intermediate (WTI) traded at $77.50 per barrel at the same time, a 0.44% rise from the previous session that closed at $77.16 per barrel. Both benchmarks started the week with upward movements following an attack in the Israeli-occupied Golan Heights. Despite cease-fire negotiations, escalating geopolitical tensions in the Middle East, home to a vast majority of global oil reserves, increases supply risk in the markets. On Saturday, a missile attack was carried out on a football field in the town of Majdal Shams in the occupied Golan Heights, killing 12 people. Israel blames Hezbollah for the attack, but the Lebanese group denied playing any role. Fear over a full-blown war between Israel and Hezbollah has grown amid an exchange of cross-border attacks between the two sides. The escalation comes against the backdrop of a deadly Israeli onslaught on Gaza which resulted in the death of more than 39,300 people since last October. Meanwhile, negotiations regarding the cease-fire in Gaza and the exchange of prisoners between Hamas and Israel are currently stalled after the postponement of the Israeli delegation’s visit to next week, which was initially scheduled for Thursday. However, gains were weak as the outlook for crude demand in the world’s largest crude oil importer remained bleak. Prices continue to be depressed by concerns about demand in China as it grapples with a slowing economic recovery. This week, market players will be watching the US Federal Reserve’s (Fed) meetings in a bid to gauge the oil market trajectory. Fed will review its policy on July 30-31. While investors expect the bank to keep rates unchanged, they will also look for further evidence that a rate cut will happen at the September meeting. Experts believe that reducing policy interest rates soon would support economic activity in the country, resulting in higher oil demand.

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