What 18 Oil Executives Just Told Me in Las Vegas
As you read this, Marina and I are once again on a flight home from Las Vegas.
It was our sixth trip to “The Strip” since May. It seems everybody wants to meet there these days. It is also the first stage in what is going to be a very hectic travel schedule.
We arrive back in Pittsburgh late tonight. Then I fly solo to Baltimore tomorrow to work on very significant new product launch at Money Map Press (you’re going to hear a great deal about this one soon…so stay tuned.)
Afterwards, there won’t be much time to wind down. The two of us are off to Rio de Janeiro on Thursday, back on Thanksgiving and then on to Moscow the next day.
Of course, I will be bringing you along on all of these trips – including my December adventures which I’ll be discussing in due course.
For now, let’s just say it’s shaping up to be a blur of airports over the next two months.
As I noted about a month ago, there are some big things happening in the global energy mix right now and they are going to provide us with some great investment opportunities.
But first, I need to talk to some very important but scattered people.
That brings me to the 18 oil executives I just met with in Vegas…
The Perfect Storm Brewing in Nigeria
All 18 of the executives I met with were from the Nigerian National Oil Corporation (NNOC).
The NNOC is currently facing a range of problems, with production volume declining in what ought to be a thriving crude oil environment. What’s more, Nigeria is also one of the few places left in the world that still has a large supply of light sweet crude.
Light sweet crude is the most prized oil because it is low in sulfur (sweet) and low in weight (light), making it the easiest to refine. That makes it the most desirable crude in an already high-priced market.
That would seem to put Nigeria in a very enviable position…if it weren’t for the situation in the country right now.
You see, in a Houston meeting more than a year ago, I laid out what I saw as the 11 priorities that would be necessary for Nigeria to reverse its course. These involved revisions in its energy, governmental, security, legal, infrastructure, and training sectors.
But one year further down the road, the results have not been encouraging.
Today, Nigeria is still experiencing a continuing decline in oil production (its primary source of hard currency), the exodus of more foreign international oil companies, accelerating security concerns in the north and in the main onshore basin in the south, rising political unrest, and expanding corruption.
This is a perfect storm if there ever was one.
The executives I met with in Vegas are not naïve about these prospects, but they are also better administrators and planners than their predecessors. It is a small encouragement, perhaps, but an improvement nonetheless on what we had to work with just a few years ago.
The problems are numerous in what should already be a prosperous country despite its size (at 180 million, it is the largest country by population in Africa). All of these difficulties end up being one element or another of a vicious cycle.
This situation hasn’t changed in decades and works to pull down each and every reform or advance. This ongoing cycle requires that changes take place at several points in the energy sequence simultaneously or any attempt at change will fail.
The Vicious Cycle Continues
For example, consider the following…
Nigeria is one of the top ten producers of oil in the world. Unfortunately, it has a miserable refining sector. The facilities are old, in desperate need of updating, and unable to come close to providing domestic supplies of diesel.
That is important because of another shortfall in the cycle.
The country also has a terrible power generating capacity. On an average day, it provides only about 15% of the electricity required by the nation. The remainder – 85% of daily needs – must be provided by private generators.
And guess what?…The generators run on diesel…and because of the refinery situation, the diesel needs to be imported.
So a nation with large oil resources both on and offshore is reliant on imports of a basic oil product to survive.
Or consider the difficulties Nigeria faces in passing a national oil law.
It’s Petroleum Industry Bill (PIB) has been in process for years. The most recent version has 362 sections and is designed to cover every aspect of the production, processing, distribution, administration of, and control over, the oil and gas in the country. This is about as pervasive a piece of legislation as you can find anywhere.
The problem here is it can’t be passed. The regions (they are called states in Nigeria) refuse to discuss the matter, while corruption impedes passage in one direction and smuggling in another.
Because the PIB has been stalled for some 14 years, the government has been forced to use stopgap measures in the absence of an omnibus code. Those piecemeal approaches have spawned all manner of inefficiencies and outright scams generating opportunities for vested interests at the local level.
And these in turn prevent the PIB from moving forward. The vicious cycle continues.
I have seen similar developments in a number of countries where the surfeit of energy or its potential should be igniting genuine prosperity. Nigeria is hardly alone in this regard.
However, based on our discussions, I may be moving one step closer to determining what can be done about all of this. I have been invited to Lagos, the Nigerian capital, in April.
We shall see what the lay of the land actually is when I get there. I promise to keep you posted.
PS. As you know, we’ve been using every opportunity we can to make you aware of the developing situation surrounding one of the biggest oil discoveries of all time. Now the small Western company that everything hinges on is about to go ballistic. I have all the details right here.