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For decades, the illicit oil and fuel market has plagued the energy industry. Around the world, emerging energy and oil costs have led to an increase in fuel smuggling. Just a few years ago, fuel smuggling from Colombia to Venezuela across the porous border has become endemic, reversing decades of reasonable Venezuelan oil smuggling flows thanks to Venezuela’s severe fuel shortages and high oil costs. and the market for petroleum-based fuels, equivalent to US$133 billion. in a year. But oil theft from Africa’s largest oil manufacturer has reached such epic proportions that it poses an existential threat.
The CEO of Nigerian National Petroleum Company Limited (NNPCGROUP), Melee Kyari, has revealed that Nigeria is wasting almost all oil production from the Bonny oil hub, the city that called its premium oil, Bonny Light. Bonny Light is a soft crude produced in Nigeria and a benchmark crude for all West African crude production. Bonny Light has very smart gas yields, which has made it a popular crude for U. S. refineries. In the U. S. , especially on the East Coast of the United States.
“As you may know, due to the very unfortunate acts of vandalism along our major pipelines from Atlas Cove to Ibadan, and all the others connecting the 37 warehouses we have across the country, none of them can receive products today. The explanation of why is very simple. For some lines, for example, from Warri to Benin, we have not operated for 15 years. Are you the unhappy chimney near Sapele that killed so many people?we had to close it and as we talk, we have a peak of losses in our product portfolio,” he said.
“Remember Lagos when a fire broke out in one of our pipelines?We found that some of the pipelines were connected to personal dwellings. And not only that, with all sensitivity to our devout beliefs, some of the pipelines and some of the products we discovered are in churches and mosques,” Kyari added. Related: China Quietly Sells Russian Surplus LNG to Europe
Although the figures are estimates, the NNPCL and the Ministry of Petroleum have estimated the total number of barrels stolen between 200,000 and 400,000 per day. These are massive figures when you consider that Nigeria managed to produce just 1. 083 billion b/d in July, well below its OPEC quota of 1. 8 million b/d. With a barrel of Bonny Light lately turning to $117. 60, Nigeria is wasting billions of dollars every year due to oil theft. In June, NNPC revealed that it had lost $1 billion to oil. theft only in the first quarter of 2022, along with shell plc subsidiaries. (NYSE: SHEL) in the country claiming that illegal seizures now pose an existential risk to the entire market.
Increase in oil theft
Meanwhile, Latin America has long been a hot spot for this illicit activity, and oil theft has increased considerably in recent times due to high oil prices.
Criminal syndicates linked to tough drug cartels have targeted state-controlled Pemex pipelines to steal crude oil and derivatives. more oil and derivatives a day to oil thieves.
But it’s not just individual investors and cartels that use cryptocurrencies in illegal oil transactions. In 2018, the Venezuelan government introduced a cryptocurrency dubbed “Petro” that subsidized through oil in an effort to circumvent U. S. sanctions. U. S. and foreign. Petro linked to Venezuelan crude, haggling over symbolic purchases with a barrel of oil. At first glance, this seemed to be the best niche for capital generation given that Venezuela is home to the world’s largest oil reserves. However, Petro has failed to gain traction largely due to its lack of app, as well as its location away from classic ad websites. As a result, oil investors in the region have been forced to switch to classic cryptocurrencies like bitcoin, facilitating a thriving black market along the border with Colombia.
The very nature of cryptocurrency transactions (encrypted, nameless, and decentralized) makes them the new currency of choice on the oil and fuel black market. due to excessive volatility of energy markets. Cryptocurrencies have provided a useful option to the classic bureaucracy of black market trading thanks to their wide acceptance. In addition, virtual currencies have a multitude of features that excite them to oil smugglers: they are transferred without, invested, fungible and insured.
By Alex Kimani for Oilprice. com
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