Nigeria’s Buhari says government to talk to Niger Delta leaders

"We have to be very serious with the situation in the Niger Delta because it threatens the national economy," Buhari said in a statement.
“I believe the way forward is to take a sustainable approach to address the issues that affect the Delta communities,” he said without elaborating.

ABUJA (Reuters) – The Nigerian government will talk to leaders in the Delta region to address their grievances while cracking down on militants who have staged a wave of attacks oil pipelines there, President Muhammadu Buhari said on Sunday.

Local officials and Western allies such as Britain had told Buhari that moving in troops to the Delta was not enough to stop attacks, which have cut Nigeria’s oil output to a 20-year low.

“The recent spate of attacks by militants disrupting oil and power installations will not distract us from engaging leaders in the region in addressing Niger Delta problems,” Buhari said in a speech marking his first year in office.

The former military ruler also said the government was committed to a clean up of polluted areas, a major source of dissent in the Delta along with widespread poverty.

“I believe the way forward is to take a sustainable approach to address the issues that affect the Delta communities,” he said without elaborating.

But security operations would still go on, he said.

The army has moved reinforcements to the swamps, with soldiers on Saturday raiding for the second time a community that is home to a former militant leader linked to attacks.

“We shall apprehend the perpetrators and their sponsors and bring them to justice,” Buhari said.

On Thursday, Oil Minister Emmanuel Ibe Kachikwu said an amnesty program for former militants, signed in 2009 to end a previous insurgency, needed to improve.

The scheme had funded cash benefits and job training to militants who have laid down their arms but has been cut by the government by two-thirds. Buhari has also upset former militants by ending contracts to protect pipelines, part of a drive to tackle corruption.

Moving in the same direction, a committee set up by Delta state leaders said on Thursday that the federal government and oil firms have neglected the grievances of local communities.

On Saturday, Bayelsa state government in the Delta said militants attacked a crude oil pipeline operated by Italy’s ENI, hours after a group called Niger Delta Avengers militants claimed another strike.

The Avengers have claimed a string on attacks on oil and gas facilities in the last three months as part of what they frame a battle for independence. They have given oil firms until the end of this month to leave the region.

See how Militants are controlling OPEC’s oil production

Militants patrolling the creeks of the Niger Delta area of Nigeria in 2006.
Militants patrolling the creeks of the Niger Delta area of Nigeria in 2006.

Oil watchers have been waiting for a production cut for almost two years.

But while OPEC hasn’t yet participated in a coordinated effort, the cartel of oil-producing countries technically has slashed its output.

Or, more accurately, Nigeria, one of its 13 members, has.

“Actually, we did have a de facto OPEC cut. Just — it was by accident,” Helima Croft, the head of commodity strategy at RBC Capital Markets, told Business Insider in an interview on Tuesday.

“Nigeria is that big supply-disruption story — and it can just go on,” she said.

Nigerian oil production has fallen by 31% this year to about 1.4 million barrels a day, down from 2.03 million barrels a day in January. That’s such a huge drop that Angola is now the No. 1 producer in Africa, as its production held steady in April at 1.8 million barrels a day.

Attacks on energy infrastructure by a new militant group called the Niger Delta Avengers have been the main cause of the production outages. Most notably, the group attacked a Chevron offshore facility earlier this month and the underwater Forcados export pipeline operated by Shell in late March.

Croft has since argued that even if Canada comes back from its devastating wildfires, Nigeria has essentially caused a rebalancing in the oil market all by itself.

The Niger Delta Avengers’ rise has roots dating back to the 2000s, when armed militants in Nigeria’s oil-rich Niger Delta, including members of the Movement for the Emancipation of the Niger Delta, routinely kept hundreds of thousands of barrels of oil off the market.

At its peak, MEND slashed Nigeria’s output by half and cost the government $19 million in daily defense outlays, according to previously cited data by the RBC Capital Markets team.

In an effort to curtail the chaos and huge financial losses, the Nigerian government in 2009 signed an amnesty agreement and pledged to provide monthly cash payments and vocational training programs to the nearly 30,000 former militants in exchange for cooperation. Some of the more influential members like the ex-leader Government Ekpemupolo (referred to as Tompolo) also received lucrative security contracts worth nearly $100 million a year.

The arrangement was a pretty good Band-Aid. But it failed to address the fundamental drivers of instability in the region such as poverty, corruption, and the proliferation of weapons.

Fast forward to today: The Buhari administration has cracked down on corruption in the region by axing the expensive security contracts and issuing indictments for theft, fraud, and money laundering.

Even if the government wanted to pay off the militants today, it doesn’t exactly have the money for it, with oil prices still far below their peak and state resources redirected to counterinsurgency operations against Boko Haram.

“When people say the government can just pay them off — with what money?” Croft told Business Insider. “What president is running Nigeria right now? Now, if President Buhari folds to the militants, his whole reason for being in office then evaporates. He ran on a program of fixing Nigeria and ending the cycle of payoffs.”

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Given that the Nigerian disruptions are at least partially a product of long-run structural issues, one can argue that they could last for some time. (As opposed to, say, the Canadian wildfires, which, while devastating, are only a temporary headwind.)

“I think we have to look at what happened in the past and say, well, could they potentially shut in production? … No company is going to keep their operations going when people show up with AK-47s,” Croft said. “You just wait it out. You don’t run a risk to your personnel or operations.”

“These are structural problems in these oil-producing states,” she continued. “This not noise. This is not something that you can take your magic wand and make this thing go away.

“So this one, I think, fasten your seat belts. This one’s going to go on.”

 

Eni facilities attacked again in Nigeria

Attacks on energy infrastructure in the Niger Delta as the Nigerian economy reports negative growth for the first quarter. Graphic courtesy of Nigeria's National Bureau of Statistics
Attacks on energy infrastructure in the Niger Delta as the Nigerian economy reports negative growth for the first quarter. Graphic courtesy of Nigeria’s National Bureau of Statistics

ABUJA, Nigeria, May 23 (UPI) — Italian energy company Eni confirmed Monday that some of its infrastructure in Nigeria was once again the target of a militant attack.

A spokesperson for the company confirmed through email the Ogbaimbiri-Tebidaba pipeline was targeted by militants in Nigeria. About 4,200 barrels of oil per day worth of Eni’s equity production was affected by the attack.

The attack was the second on Eni infrastructure in Nigeria in less than a week. No group claimed responsibility for the attacks and the Italian energy company offered no further information when pressed for details.

A group calling itself the Niger Delta Avengers took credit for attacks on Chevron and Royal Dutch Shell in early May. The group said it was waging war on the energy sector because of environmental degradation and corruption in the region.

The Movement for the Emancipation of the Niger Delta, a group observing a cease-fire reached in 2014 with the government, said recently it condemned the new assault on the Niger Delta. It distanced itself from the Niger Delta Avengers said the new attacks had nothing to do with regional struggles, but were instead a tool to pressure the government of President Muhammadu Buhari.

The Niger Delta Avengers in a mid-May declaration said it was frustrated by what it saw as a lack of attention to the region paid by the Nigerian president.

Renewed attacks on oil in Nigeria, a member of the Organization of Petroleum Exporting Countries, comes at a time of economic downturn. The oil sector during the first quarter of the year accounted for about 10 percent of real gross domestic product. That’s slightly lower than the previous quarter, but 2.2 percent higher year-on-year.

The nation’s economy is nevertheless in contraction. The government last week reported full GDP at -0.35 percent.

“Quarter on quarter, real GDP slowed by 13.71 percent,” the government said.

Witnesses say an explosion has closed a second Chevron facility in Nigeria

Nigeria's oil production already had reached a 20-year low of less than 1.6 million barrels a day from a projected 2.2 million, because of attacks on a Chevron platform last week and on a pipeline that forced Shell to declare force majeure on Bonny Light crude on Wednesday.
Nigeria’s oil production already had reached a 20-year low of less than 1.6 million barrels a day from a projected 2.2 million, because of attacks on a Chevron platform last week and on a pipeline that forced Shell to declare force majeure on Bonny Light crude on Wednesday.

LAGOS, Nigeria (AP) — An explosion closed a second Chevron facility in Nigeria, witnesses said Friday, as renewed attacks by militants further cut production in Africa’s biggest petroleum producer.

Adding to Nigeria’s economic woes, Exxon Mobil on Friday said some production of Qua Iboe crude — the West African nation’s largest crude grade — has halted because a drilling rig damaged a pipeline. The company declared force majeure, protecting it from contractual export obligations.

Nigeria’s oil production already had reached a 20-year low of less than 1.6 million barrels a day from a projected 2.2 million, because of attacks on a Chevron platform last week and on a pipeline that forced Shell to declare force majeure on Bonny Light crude on Wednesday. The same day, Shell began evacuating workers from its offshore Bonga oilfield following a militant threat, though production there is continuing.

Shell’s Forcados export terminal has been shut since a February bombing.

Villagers said militants attacked a Chevron well on Marakaba pipeline on Thursday. They requested anonymity for fear of repercussions amid a massive deployment of troops that has led more than 10,000 people to flee the fallout. Chevron did not respond to requests for comment.

A new group, the Niger Delta Avengers, has claimed most attacks. They want natives of the oil-producing southern Niger Delta to get a bigger share of oil wealth and are angry about cuts to an amnesty program that paid militants to guard the installations they once attacked.

There are suggestions the violence is being fueled by some Christian politicians in the oil-producing south opposed to President Muhammadu Buhari, a northern Muslim. Eurasia Group risk assessment said the sophistication of attacks points to such a scenario and would indicate the Avenger group “poses a greater threat than its small numbers and scant grassroots support would indicate.”

The Nigerian production cuts have helped boost oil prices — to nearly $50 a barrel from under $30 a barrel in January — according to the International Energy Agency.

Nigerian Militants: Oil Companies Have 2 Weeks To Evacuate Or Else…

Niger-Delta-Militants-620x330

Charles Kennedy, Oilprice.com /

The Niger Delta Avengers (NDA), the group behind the string of attacks that have halted major operations in the oil-rich Niger Delta, have issued a threat to all oil companies in the region to shut down and leave or face stepped up attacks.

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Elena Holodny in Business Insider Reported how  Chevron shut down an offshore oil facility after “unidentified attackers” bombed it last week, causing an oil spill.

And a new militant group calling itself the Niger Delta Avengers has claimed responsibility for the attack, according to the WSJ.

Notably, this attack is not an isolated incident, but rather reflects the deteriorating political and security dynamics posing an immediate threat to Nigeria’s oil output.

Since the government ordered an arrest warrant for members of the Movement for the Emancipation of the Niger Delta (MEND), including the ex-leader Government Ekpemupolo, the country has seen a spike in attacks this year, including one on the Forcados export pipeline operated by Shell. (The Avengers have taken credit for this attack, too, according to reports cited by Bank of America analysts.)

The Niger Delta Avengers reportedly want locals in the Niger Delta to have more control over the oil resources in the region, as well as higher living standards for those living there and the continuation of the Niger Delta amnesty program, according to Bank of America Merrill Lynch’s Oyin Anubi.

(Although, Anubi cited local press reports noting that Ekpemupolo has tried to distance himself from the Niger Delta Avengers, who aren’t part of the existing Niger Delta Amnesty program.)

The Avengers’ agenda seems to parallel the situation back in the 2000s, when armed militant groups, including MEND, routinely kept hundreds of barrels of oil off the market.

At the time, MEND portrayed “itself as political organization that wants a greater share of Nigeria’s oil revenues to go to the impoverished region that sits atop the oil,” according to The Economist.

In 2009, the government signed an amnesty agreement pledging to provide monthly cash payments and vocational training programs to the nearly 30,000 former militants in exchange for cooperation.

But although the arrangement was a pretty good band-aid, it failed to address the fundamental drivers of instability in the region, such as poverty, corruption, and the proliferation of weapons.

Moreover, Nigeria’s current economic slump adds more pressure to the situation, and the current administration under Muhammadu Buhari has vowed to reduce corruption and excessive government spending.

Notably, the recent attacks have taken a toll on oil output in Nigeria. According to data cited by Anubi, oil production is now down to mid-1990s lows, with unplanned supply outages ranging from 200,000 to 300,000 b/d.

And although the country has previously delt with similar threats, Anubi argues that there are three major reasons to be more concerned now than in previous years:

  1. The large-scale attack on an offshore facility — as opposed to an onshore one — shows that the scale of militancy has increased.
  2. The regulation of Nigeria’s oil sector remains a bit unclear as a new bill is intended to split the national oil company into two parts.
  3. The current Nigerian government under Buhari, which aims to reduce corruption and excess expenses in the lower oil environment, is “incompatible with spending large sums of money to appease Niger Delta militants,” writes Anubi.

In short, as RBC Capital Markets’ Helima Croft noted back in late March, “the government appears to be on course for a head on collision with armed militants in the oil region.”

 

Nigeria lifts gas subsidy, nearly doubling the price of fuel

Lifting of the subsidy on gas would nearly double  the price amid a massive fuel shortage
Lifting of the subsidy on gas would nearly double the price amid a massive fuel shortage

LAGOS, Nigeria (AP) — Nigeria’s government announced Wednesday it is lifting a controversial subsidy on gas, nearly doubling the price amid a massive fuel shortage and militant attacks on oil installations in Africa’s biggest petroleum producer.

Previous attempts to end the subsidy have provoked riots and, in 2012, the biggest demonstrations ever seen, forcing the government to retract.

The 4-million-strong Nigeria Labour Congress immediately announced that it and its civil society allies will fight the “most audacious and cruel” move that will “make life more miserable” for Nigerians struggling with spiraling inflation and increases in electricity tariffs despite more blackouts. The year-old government of President Muhammadu Buhari said the decision was taken at a meeting that included legislators, labor leaders and Enough Is Enough Nigeria, which helped lead the 2012 protests. The congress said this implied an agreement that never happened as it advised the meeting that current prices should stand.

Petroleum Minister Ibe Kachikwu announced the new price of a maximum of 145 naira (73 U.S. cents) a liter, up from 86.5 naira (43 cents). He noted that the months-long scarcity has meant Nigerians already are paying up to 250 naira ($1.26) a liter on the black market.

Kachikwu said importers have had difficulty sourcing foreign currency because of a huge decline in foreign exchange earnings caused by low oil prices. Nigeria refines only enough crude to provide half its needs.

In this photo taken Sunday April 10, 2016, motorcycles wait for fuel at the petrol station in Abuja, Nigeria. Nigeria's government announced Wednesday May 11, 2016 it is lifting a controversial subsidy on gas, nearly doubling the price amid a massive fuel shortage and militant attacks on oil installations in Africa's biggest petroleum producer. (AP Photo/Sunday Alamba)
In this photo taken Sunday April 10, 2016, motorcycles wait for fuel at the petrol station in Abuja, Nigeria. Nigeria’s government announced Wednesday May 11, 2016 it is lifting a controversial subsidy on gas, nearly doubling the price amid a massive fuel shortage and militant attacks on oil installations in Africa’s biggest petroleum producer. (AP Photo/Sunday Alamba)

He said the government is liberalizing the market, allowing any Nigerian entity to import fuel using foreign currency from any source. That would include foreign exchange bureaus where the naira recently has traded at up to double the official rate of 199 naira to the dollar.

The meeting was led by Vice President Yemi Osinbajo, who has said that the subsidy costs the government $5 billion a year.

Eighty percent of Nigeria’s foreign currency comes from the petroleum industry, hit by renewed militant attacks that have cut production from 2.2 million barrels a day to about 1.68 million.

Report: Shell evacuates Nigerian facility

Nigerian militants wreaked havoc on the country's oil sector in the 2000s (AFP Photo/Pius Utomi Ekpei)
Nigerian militants wreaked havoc on the country’s oil sector in the 2000s (AFP Photo/Pius Utomi Ekpei)

ABUJA, Nigeria, May 9 (UPI) — Nigerian media reported Monday a group calling itself the Niger Delta Avengers forced the evacuation of facilities in the area operated by Royal Dutch Shell.

Nigerian newspaper Vanguard reported subsidiary Shell Petroleum Development Corp. evacuated around 100 staff from an oil facility that was producing around 90,000 barrels of oil per day. The newspaper reported that a skeleton crew was left behind, though operations at the Shell facility were suspended.

Vanguard reported the militant group calling itself the Niger Delta Avengers forced the Shell evacuation. The group last week took credit for knocking pipelines controlled by the Nigerian National Petroleum Corp. and Chevron offline. The group said the attacks came after issuing an ultimatum to the Nigerian government about developments in the Niger Delta.

The Nigerian newspaper quoted a source close to the militant group as saying it was determined in its operations against state interests.

“They will cripple oil and gas supply to the country as long as government remains recalcitrant to their demands,” the source said.

There was no official statement from either the Niger Delta Avengers or Shell on the evacuations.

The Niger Delta Avengers in February launched a campaign it called Operation Red Economy. The purpose, it said, was to start a revolution aimed at wrestling the country away from the hands of the “wicked” administration of Nigerian President Muhammadu Buhari.

Advocacy group Global Witness in March said Shell and its partners in Nigeria may have exposed shareholders to a high level of risk in a corrupt system. The advocacy group said oil production license 245 was sold in the late 1990s for $20 million to a company “secretly owned” by then Nigerian Oil Minister Dan Etete and later sold to Shell and Italian energy company Eni for $1.1 billion.

In March, Nigerian Petroleum Minister and Managing Director of the Nigerian National Petroleum Corp. Emmanuel Kachikwu said the state oil company would be split up into dozens of distinct entities in an effort to address corruption and revenue losses.

OTC 2016: Egypt to Offer Blocks, Zhor Project Creates 5,000 Jobs

Egypt, boosted by the recent success with the offshore Zohr gas project in Shorouk concession, intended to offer 28 blocks for bidding by foreign oil and gas companies soon, Tarek El Molla, the country’s Minister of Petroleum and Mineral Resources said Tuesday at the Offshore Technology Conference (OTC) 2016 in Houston.

“We are going to call a new bid round for 28 blocks … in the coming few weeks,” the Minister indicated. He told Rigzone after the session that the blocks are located in the Gulf of Suez, Red Sea, Desert Western, Desert Eastern and Desert Mediterranean.

Egypt has over the last two and a half years signed 66 agreements for new upstream oil and gas blocks, securing a minimum commitment of $14 billion.

Italy’s Eni S.p.A. signed an agreement with the Egyptian authorities to develop the Zohr field in February, with first gas targeted for late 2017, slightly over two years after the discovery. Gas production from Zohr is expected to be progressively ramp up to around 2.65 billion standard cubic feet per day (Bscf/d) or 75 million standard cubic meters per day (MMscm/d) by 2019.

“Zohr discovery has raised foreign oil companies’ interest and attract investment potential in (offshore Egypt’s) deepwater areas,” he said, adding that it was a feat for the project to achieve first production 28 months after discovery, something that normally takes 6 to 8 years worldwide.

Giving an update on the Zohr project, the Minister said 20 wells will be drilled, including 6 during the first phase, and these wells will be tied in to three major pipelines connected to the shore that is located approximately 124 miles (200 kilometers) away.

The development of the Zohr gas project is expected to create several thousand jobs.

“Not less than 5,000 jobs during the construction, (but these are) not permanent jobs. I am talking about construction jobs, after that I am not sure. We have already got a good number (hired by) the operating company,” Tarek El Molla said in response to Rigzone’s query.

Meanwhile to enhance Egypt’s attraction as an investment destination, the government has reduced arrears to foreign oil and gas companies by 52 percent since 2011/2012.

“We are addressing the historical debts, our arrears … we brought them down by half. It used to be $6.3 billion and it’s $3 billion now (end 2015). And work is still in progress to reduce them further,” the Minister said.

Egypt, currently the world’s 15th largest gas producer and with the 16th largest gas reserves, is also revamping the domestic gas law as part of a substantial reform in the country’s gas sector. The proposed law mandates the creation of an independent regulator, with the legislation pending ratification by parliament.

Massive oil theft by pirates costs Nigeria $1.5 billion every month

A rescued Panama-flagged Maximus vessel at the Naval dock yard. It was supposed to be a U.S.-led naval training maneuver off the coast of West Africa when real-life drama intervened, with pirates taking over an oil tanker and turning the exercise into a rescue mission. Navies from the United States, Ghana, Togo and Nigeria tracked the hijacked tanker through waters off five countries before Nigerian naval forces stormed aboard Saturday Feb. 20, 2016, amid a shootout that killed one of the pirates. (Photo: Sunday Alamba, AP)
A rescued Panama-flagged Maximus vessel at the Naval dock yard. It was supposed to be a U.S.-led naval training maneuver off the coast of West Africa when real-life drama intervened, with pirates taking over an oil tanker and turning the exercise into a rescue mission. Navies from the United States, Ghana, Togo and Nigeria tracked the hijacked tanker through waters off five countries before Nigerian naval forces stormed aboard Saturday Feb. 20, 2016, amid a shootout that killed one of the pirates.
(Photo: Sunday Alamba, AP)

Irina Slav, OilPrice.com /

Depressed oil prices, rampant corruption, and pipeline vandalism are only parts of Nigeria’s oil problem. It’s now losing a massive 400,000 barrels of crude daily to pirates in the Gulf of Guinea, an amount equal to the entire daily export capacity of its Forcados terminal.

Overall damage from piracy, theft and fraud for Africa’s largest oil exporter is estimated at some $1.5 billion a month, according to U.S. deputy ambassador to the UN, Michele Sison, citing a Chatham House report.

Attempts by local governments and the UN to put a stop to piracy have met with some success, but the practice continues — shifting location and adapting to new security measures, so now the UN Security Council is calling for a comprehensive framework of measures aimed at eradicating it.

Since 2014, says the UN, Gulf of Guinea piracy has increased at an alarming rate.

Two pirate attacks on April 11 affected seven countries. The cargoes came from Nigeria, Turkey and Greece; the ships were flying Maltese and Liberian flags; and the 8 missing crewmen were from the Egypt, the Philippines and Turkey.

In the first quarter of this year alone, there were six recorded pirate attacks in the Gulf of Guinea, and six attempted attacks. Nine of those were off the coast of Nigeria, while one was off the coast of Côte d’Ivoire, and two were within the territorial waters of the Democratic Republic of the Congo.

Last year, there were 100 similar incidents in the Gulf of Guinea, according to the UK’s ambassador to the UN, Peter Wilson.

Dealing with the pirates requires an international effort, and particularly a coordinated effort by those countries near the Gulf of Guinea. There isn’t much Nigeria can do on its own. Without a major overhaul of intelligence sharing and local law enforcement collaboration and training, the piracy scourge will continue to worsen.

Nigeria has thrown its lot in the fight against pirates, but it has too much on its plate already. Plagued by low oil prices, pipeline vandalism and stalling reforms at its state oil company, the country has more than enough to worry about in addition to losses to pirates.

In March, Nigeria pumped 1.677 million barrels of crude, which was a decline on the previous month’s 1.744 million. According to a Financial Times analysis, the decline is set to continue over the coming years, largely because the reforms at the NNPC, pledged by new president Muhammadu Buhari to tackle long-time corruption and inefficiency, have so far not yielded any actual results.

In addition to dealing with corruption, as part of the reforms, Buhari’s government planned to change the terms of the production-sharing agreements it has with foreign oil companies operating in the country. Oil majors with a Nigerian presence said at the time that such a move could deter investments and ultimately have a negative effect on oil revenues.

All in all, Nigeria has sunk deeper and deeper, and even a continued oil price rally would not be sufficient to prop it up as production continues to decline.

For June, Nigeria plans to export 1.57 million barrels of crude, for instance, compared with 1.6 million barrels scheduled to leave its shores in May. What’s more, its budget for 2016 had envisaged a daily output of 2.2 million barrels—an amount unlikely to be reached in the short-term.

Disputes between the NNPC and foreign oilfield operators are hampering normal output at more than one field. That’s in addition to the growing nervousness among international oil companies regarding Nigeria’s ability to ensure the stability of production and revenue sharing.

Vandals are responsible for an estimated 250,000 barrels in daily losses. Pirates are stealing at a rate of 400,000 barrels per day. That’s a 650,000-barrel shortage on the budgeted daily output. So–barring all conscious effort on the part of the Nigerian government—prices will have to rise more substantially than they have so far this year for Nigeria to feel any positive effect.

Things are so bleak in the oil industry that an offshore-drilling company got a 90% discount on a $700 million rig

offshore-rig

If you want a perfect encapsulation of just how bad it is for the energy industry, we’ve got a story for you. Ocean Rig, an offshore oil-drilling company, just got an incredible “going out of business” deal on a deep-ocean drillship. According to maritime-industry blog gCaptain, Ocean Rig got a sixth-generation drillship that was worth up to an estimated $700 million in 2011 for just $65 million.

So Ocean Rig just got a 90.7% discount on a massive piece of equipment. As gCaptain noted, Ocean Rig bought four of a similar type of rig from builder Samsung Heavy Industries in 2008 for $800 million each. The price for a barrel of crude at the time was as high as $140 — crude is now just above $40. This isn’t necessarily surprising. In an age when energy companies are becoming increasingly cost-conscious, offshore drilling is one of the most expensive types of drilling.

The seller of the rig, Brazilian firm Schahin Group, also tells a part of the energy industry story. The company is one of an ever increasing group of oil firms to go into bankruptcy and have to liquidate assets to survive. So pretty much the read here is that the sale is a great deal for Ocean Rig, and another terrible sign for the industry.

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