Virginia Sees Record Highs POSTED: 5:16 p.m. EST March 24, 2003

WASHINGTON -- There's a mixed bag of numbers from the pump patrol.

Leaders for the AAA Mid-Atlantic Region said the average price for a gallon of self-serve regular gasoline in the D.C. region is down 1 cent from a week ago. However, at a $1.70, it's hardly cheap.

In Virginia, the statewide average hit a new record high of a $1.614.

The auto club is less than optimistic about seeing relief anytime soon. Along with concern over the Iraq war, there's trouble in Nigeria and Venezuela, two key oil suppliers. Plus, the upcoming summer travel season will create a higher demand.

By the way, a year ago, Washington area drivers were paying about $1.30 for a gallon of gas.

Copyright 2003 by The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Double speak March 8, 2003 Posted to the web March 24, 2003 Philip Oladunjoye

Key managers in the oil sector engage in double speak as Nigeria groans under acute fuel scarcity

His mobile phone was his saving grace that day. With it, Charles Obinna, an accountant, virtually ran the activities in his office from a petrol station in Lagos where he had been trapped for hours in the long queues for fuel.

Although he kept assuring his subordinates that he was arriving office soon, he didn't succeed in getting there until about 3.30 p.m.

Obinna was not the only Nigerian whose programme was disrupted by fuel scarcity that has seen the return of long queues to petrol stations nationwide.

Kikelomo Akanbi is yet another. She was stranded at a bus-stop as a result of fuel scarcity that persisted throughout last week. The money she had on her could not pay her way to her destination. The transport fare had suddenly jumped by more than one hundred percent. Akanbi eventually boarded a cab and alighted at a point where her money could cover. She had to trek the remaining two kilometres to get to her destination. These are some of the agonising experiences of many Nigerians in the past three weeks when the country was hit by a fuel scarcity.

The fear that there might be fuel scarcity first reared its head, February 14 when workers in the department of petroleum resources embarked on a strike action to press home their demands on the Federal Government for improved working conditions. Motorists swooped on all the filling stations to fill their vehicle tanks. An action which was regarded by top officials of the Nigerian National Petroleum Corporation, NNPC, as panic buying.

Ndu Ughamadu, group general manager, public affairs of NNPC, had attributed the initial scarcity to panic-buying resulting from the indefinite strike embarked upon by DPR workers. Jackson Gaius-Obaseki, group managing director, NNPC, however, allayed the fear of Nigerians saying that the nation's refineries were operating at optimum capacity. He called on Nigerians to go about their legitimate businesses without fear of shortage of the products.

Similarly, Belema Osibodu, DPR spokesman had further allayed the fear entertained by Nigerians when he disclosed that all management staff of DPR had been drafted to the depots, terminal and jetties to man facilities, and to ensure that operations were not disrupted. "Operations will continue as normal crude oil will still be lifted and the nation will not incur any loss," Osibodu had said. Those assurances did not ease the scarcity.

Seven days later, February 21, DPR workers called off their strike and resumed their normal activities. But the fuel scarcity refused to go. It has even been aggravated. Many reasons were advanced for the lingering shortage of the commodity.

Obaseki, who later admitted shortage of the product in the country attributed it to the threat of war in Iraq and the political crisis in Venezuela . He said the threat of war and the political crisis in Venezuela had a toll on Nigeria stocks, saying that import supplements had been difficult to come by as some countries were buying the product at any cost at the international market in readiness for the war. "The national stock was really low when the department of petroleum resources went on strike," he declared.

Obaseki said NNPC had mapped out a strategy to forestall future scarcity. "Therefore, we have decided to place orders for fuel imports for two quarters at a time, whereby orders for the second and third quarters for this year will be made at the same time," he promised

Joseph Akinlaja, general secretary, National Union of Petroleum and Natural Gas Workers, NUPENG, disagreed with Obaseki. He attributed the scarcity to shortfalls in supply from NNPC depots. He said the scarcity could have been a serious shortfall arising from a disagreement between NNPC and its fuel - importing contractors over freight and products costs.

Newswatch gathered that a solution to the scarcity in the immediate future might not be possible owing to the crisis between the NNPC and its fuel import contract holders over the price to be paid on the cargoes. The contractors were demanding for a review in the cost of the cargoes following the change in international market prices of refined oil. The NNPC has been battling to manage the demand.

Another reason being advanced for the fuel scarcity is the fear of possible increase in the price of the product. In the past, price increases were preceded by fuel scarcity. Government officials often argued that they could not guarantee constant supply of petroleum products due to existing subsidy on the products. Government had gradually removed the subsidy on the product which brought about the current price of N26.00 per litre of petrol and N24.00 for diesel and kerosine respectively.

The fear of a possible increase in the prices of petroleum products was, however, doused by the Petroleum Product Pricing Regulatory Committee, PPPRC, a committee that advises the Federal Government on petroleum products pricing.

Rasheed Gbadamosi, chairman PPRC, had assured Nigerians that any speculation of an increase in the price of petroleum products was baseless "Of greater significance to the PPRC is that the committee is not contemplating any upward adjustment of price ceilings of products and any speculation in this regard is baseless," he said in a statement he made available to newsmen. According to him, the scarcity was as a result of unanticipated hitches in the supply chain. He urged Nigerians to stop panic-buying and allow the resumption of normal product flow. "We have been advised by the NNPC, which is the only participant left in the importation of supplement that the situation is under control and normalcy would return if the general public will eschew panic-buying and allow the resumption of normal product flow," he advised.

Newswatch learnt that NNPC had been ordering fuel from neighbouring countries to ease the tension created by the scarcity. It was gathered that two vessels of a combined capacity of 66,000 tonnes arrived Lagos Port last week from Cote d'Ivoire .

The DPR workers' demand which culminated in the strike action that triggered off the scarcity has been partially settled. The workers had demanded that the Federal Government should grant autonomy to the DPR and create a petroleum inspectorate commission, which would enable the department to generate its own fund.

The workers had also accused the management of DPR of not paying their welfare benefits which include: rent subsidy /home maintenance allowance; payment of arrears of 2002 salary increments, payment of hazard allowance and distribution of personal protective equipment/uniforms to security men and drivers.

The government, however, had even before the strike sought for a measure of autonomy for the petroleum department in its bid to re-organise the oil and gas sector. It has sent a bill to the national assembly to the effect, but it is yet to be passed.

On the workers' welfare package demand, that Federal Government had instructed the special adviser to the president on petroleum matters to take adequate steps to ensure that funds were available for the procurement of operational facilities and the payment of staff benefits.

<a href+http://www.forbes.com/business/newswire/2003/03/24/rtr916669.html>Reuters, 03.24.03, 4:41 PM ET By Richard Valdmanis SAN ANTONIO (Reuters) - The United States' drive to increase its energy independence could backfire by hurting the U.S. economy and creating political instability in countries which depend on oil export revenues, a top Saudi Arabian oil official said Monday. "Such a direction is characterized by disengagement, risk of economic stagnation, accompanied by instability in parts of the world," said Sharaf Salamah, the president of Saudi Refining. The Bush administration has said it wants to increase domestic U.S. energy supplies to lessen its growing reliance on imports, which supply more than half of U.S. oil needs. Saudi Arabia, the world's largest oil producer, was the biggest supplier of crude oil to the United States last year, sending more than 1.5 million barrels daily. "The U.S. is one of the most important economic markets for our exporters and, in fact, our producers are more dependent on export revenues than the United States is on what it imports," Salamah said at the annual National Petrochemical and Refiners Association meeting in San Antonio. Saudi Refining owns 50 percent of U.S. oil refining firm Motiva Enterprises LLC. U.S. crude oil prices rose to 12-year highs near $40 a barrel less than a month ago as a two-month oil strike in key South American supplier Venezuela and a cold northern winter strained supply. Dealers also feared war in Iraq could upset supplies from the Middle East which ships 40 percent of the world's oil exports. Oil prices have since fallen below $29 after Saudi Arabia raised production to make up for lost Venezuelan supply. The dramatic moves in oil prices have raised hackles in the world's largest energy consumer, where retail gasoline prices recently hit a record high at $1.72 a gallon, well before peak demand summer driving season. Saudi Arabia has assured oil markets that it could further increase its output if required to stabilize prices. "Saudi Arabian oil policy rests on two main pillars, to maintain market stability to support the world economy, and encourage equitable oil prices to support the Saudi economy, which the Saudi Arabian government is working hard to diversify," Salamah said. "We continue to monitor the situation and are fully prepared to take appropriate action as necessary. To fulfill the promise of supporting the market's stability, Saudi Arabia currently maintains over two million barrels per day of surplus production capacity," he said. Salamah, who was chosen to speak at the NPRA conference after Saudi Oil Minister Ali al-Naimi canceled his trip due to the onset of war, said that Saudi Arabia's commitment to ensuring a stable oil market eliminated the need for U.S. energy independence. "The concept of self-sufficiency has been discounted a long time ago as part of the move toward a global society... where each nation specializes in what it does best," Salamah said. "This is the recipe for economic optimization."

Reuters, 03.24.03, 4:12 PM ET By Manuela Badawy and Barbara Lewis NEW YORK/LONDON, March 24 (Reuters) - U.S. oil refiners are scrambling for alternatives to crude supplies lost from strife-torn Nigeria, eager to avoid being caught short as gasoline demand rises for summer, traders said on Monday. While there is plenty of lower-quality crude available on international markets, it is Nigerian crude's high gasoline yield that refiners will miss as the oil industry seeks to step up gasoline production for the vacation driving season. Energy multinationals ChevronTexaco (nyse: CVX - news - people), Royal Dutch/Shell <RD.AS> <SHEL.L> and France's TotalFinaElf <TOTF.PA> have shut most of their operations in the country's oil-rich Niger Delta with total losses of 817,000 barrels per day (bpd), or 37 percent of the West African country's 2.2 million bpd production. "The enhanced instability may continue for a considerable period, and we would not count Nigerian production as being a secure supply source for a while to come," said Paul Horsnell, oil analyst at J.P. Morgan in a research note. Refiners' options have already been restricted by supply disruptions in Venezuela since December and the loss of Iraq's crude exports last week as the U.S.-led forces launched a military offensive against Baghdad. Heavy shipments expected from Saudi Arabia in the coming weeks have yet to roll into U.S. storage tanks as U.S. crude inventories wallow near 25-year lows. Saudi supplies will in any case be heavier and higher in sulphur, or more sour, than the Nigerian light, sweet crudes which are good for making gasoline. As a result, prices are rising sharply for the U.S., Latin American and North Sea crudes that refiners can use as alternatives. Nigeria is one of the top six oil exporters to the United States, sending more than 560,000 bpd last year. "We are getting a knock-on effect on the domestic grades. Light Louisiana Sweet differentials for both April and May have strengthened, the (Colombian) Cusiana market will firm and (the disruptions) will support North Sea differentials," a U.S. crude trader said. FORCE MAJEURE The Ijaw ethnic group at the center of Nigeria's tribal violence and an army crackdown that led to the shutdowns vowed to strike in the eastern half of the delta if soldiers attacked them. Oil industry officials said they feared the a growing military campaign could further inflame the situation if the army launched reprisal attacks over the killing of a dozen soldiers by militants in recent weeks. Shell and ChevronTexaco have declared force majeure on Bonny Light , Forcados and Escravos oil exports from March 22, with expected delays on Bonny Light of up to five days and Forcados loadings by three to 14 days, depending on the cargo. U.S. refiner Sunoco (nyse: SUN - news - people), a steady buyer of Nigerian crude, has already turned to the depressed North Sea market to replace the lost barrels with Norwegian Ekofisk , a sweet crude, traders said. The heavy volumes expected from Saudi Arabia, which already stepped up production sharply this year to make up for the shortfall from Venezuela, make the loss of Nigeria's supply manageable as long as it does not drag on. "The market was so bearish, it needed something like this," a crude trader said. "Now sellers are going to be a bit more proud of their cargoes and push up differentials." But with U.S. refiners looking to ramp up gasoline production in coming weeks ahead of summer, they will be anxious to replace any lost Nigerian cargoes quickly. "Anybody who had something loading this week is going to be looking for some substitute. They could look to the North Sea where there is plenty of April-loading crude available," a North Sea trader said. Substitute cargoes from the North Sea take 12 to 13 days to reach U.S. shores compared to the 15-day voyage from Nigeria. Refiners have the advantage that Latin American and North Sea grades have both been weakening before news of the Nigerian problems. Prices for Colombia's sweet Cusiana dropped about 30 cents from the previous month, while UK and Norwegian crude differentials having fallen by as much as 60 cents in the past week. The spread between U.S. benchmark West Texas Intermediate crude and North Sea Brent has been around $2.50 in recent days, wide enough to make the shipment across the Atlantic economic for some grades, dealers say. Cheaper shipping rates have also encouraged transatlantic shipments.

1:21 PM PST Monday 

ChevronTexaco Corp. and two other multinationals said Monday they have shut oil production totaling more than 40 percent of Nigeria's 2.2 million barrel-per-day crude output in response to growing violence in the oil-rich Niger Delta, the Reuters and Dow Jones news services reported.

ChevronTexaco officials at corporate headquarters in San Ramon said the production cuts represented 7 percent of the company's worldwide oil-equivalent production.

The growing Nigerian production losses further diminished world crude supplies reduced by the war in Iraq and Venezuela's failure to fully recover from the oilworkers' strike earlier this year. They also threaten Nigeria's economy, which depends on oil income as the world's eighth-largest exporter and the United States' fifth-largest supplier.

Nigerian military officials have ordered the delta-area oil facilities evacuated and assigned Gen. Michael Ogomudia, the Army chief of staff, to the region to lead the fight to quell what has been described as Nigeria's worst outbreak of violence in 60 years, according to media reports. The fighting between members of the Ijaw and Itsekiri tribes come on the eve of next month's national elections in Africa's largest nation. The unrest also is attributed to discontent over the oil companies' concessions to local residents.

The total shut-ins reported by ChevronTexaco, Royal Dutch/Shell Group and TotalFinaElf have reached 817,500 bpd, or roughly the same amount processed daily by the East Bay's five refineries, which use 800,000 bpd when they are running at full throughput capacity. None of the East Bay refineries, including the 165,000-bpd Martinez refinery owned by Shell or ChevronTexaco's 225,000-bpd Richmond refinery, uses Nigerian crude.

ChevronTexaco said it had shut down 440,000 bpd of production. Shell, which accounts for more than half of Nigeria's production, said it has shut a total of 370,000 bpd. Shell also has declared a force majeure, warning customers it may not be able to meet March and April crude contracts. French multinational TotalFinaElf said it has shut 7,500 bpd, according to media reports.