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Crude Awakening: The Global Black Market for Oil

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A Crude Awakening: The Global Black Market for Oil

A Crude Awakening: The Global Black Market for Oil

The value of the crude oil production alone is worth a staggering $1.7 trillion each year. Add downstream fuels and other services to that, and oil is a money-making machine.

Both companies and governments take advantage of this resource wealth. More of the world’s largest companies work in the oil patch than any other industry. At the same, entire government regimes are kept intact thanks to oil revenues.

The only problem when an industry becomes this lucrative?

Eventually, everybody wants a piece of the pie – and they’ll do anything to get their share.

The Black Market in Fuel Theft

Today’s infographic comes from Eurocontrol Technics Group, and it highlights the global problem of fuel theft.

While pipeline theft in places like Nigeria and Mexico are the most famous images associated with the theft of hydrocarbons, the problem is actually far more broad and systematic in nature.

Fuel theft impacts operations at the upstream, midstream, and downstream levels, and it is so entrenched that even politicians, military personnel, and police are complicit in illegal activities. Sometimes, involvement can be traced all the way up to top government officials.

E&Y estimates this to be a $133 billion issue, but it’s also likely that numbers around fuel theft are understated due to deep-rooted corruption and government involvement.

How Fuel Theft Actually Happens

Billions of dollars per year of government and corporate revenues are lost due to the following activities:

Tapping Pipelines: By installing illicit taps, thieves can divert oil or other refined products from pipelines. Mexican drug gangs, for example, can earn $90,000 in just seven minutes from illegal pipeline tapping.

Illegal Bunkering: Oil acquired by thieves is pumped to small barges, which are then sent to sea to deliver the product to tankers. In Nigeria, for example, the Niger Delta’s infamous labyrinth of creeks is the perfect place for bunkering to go undetected.

Ship-to-Ship Transfers:
This involves the transfer of illegal fuel to a more reputable ship, which can be passed off as legitimate imports. For example, refined crude from Libya gets transferred from ship-to-ship in the middle of the Mediterranean, to be illegally imported into the EU.

Armed Theft (Piracy):
This involves using the threat of violence to command a truck or ship and steal its cargo. Even though Hollywood has made Somalia famous for its pirates, it is the Gulf of Guinea near Nigeria that ships need to be worried about. In the last few years, there have been hundreds of attacks.

Bribing Corrupt Officials:
In some countries – as long as the right person gets a cut of profits, authorities will turn a blind eye to hydrocarbon theft. In fact, E&Y says an astonishing 57.1% of all fraud in the oil an gas sector relates to corruption schemes.

Smuggling and Laundering:
Smuggling oil products into another jurisdiction can help to enable a profitable and less traceable sale. ISIS is famous for this – they can’t sell oil to international markets directly, so they smuggle oil to Turkey, where it sells it at a discount.

Adulteration:
Adulteration is a sneaky process in which unwanted additives are put in oil or refined products, but sold at full price. In Tanzania, for example, adding cheap kerosene and lubricants to gasoline or diesel is an easy way to increase profit margins, while remaining undetected.

The Implications of Fuel Theft

The impact of fuel theft on people and the economy is significant and wide-ranging:

Loss of corporate profits: Companies in oil and gas can lose billions of dollars from fuel theft. Case in point: Mexico’s national oil company (Pemex) is estimated to lose $1.3 billion per year as a result of illegal pipeline tapping by gangs.

Loss of government revenues: Governments receive royalties from oil production, as well as tax money from finished products like gasoline. In Ireland, the government claims it loses €150 to €250 million in revenues per year from fuel adulteration. Meanwhile, one World Bank official pegged the Nigerian government’s total losses from oil revenues stolen (or misspent) at $400 billion since 1960.

Funds terrorism: ISIS and other terrorist groups have used hydrocarbon theft and sales as a means to sustain operations. At one point, ISIS was making $50 million per month from selling oil.

Funds cartels and organized crime: The Zetas cartel in Mexico controls nearly 40% of the fuel theft market, raking in millions each year.

Environmental damage: Not only does fuel theft cost corporations and governments severely, but there is also an environmental impact to be considered. Fuel spills, blown pipelines, and engine damage (from adulterated fuel) are all huge issues.

Leads to higher gas prices: Unfortunately, all of the above losses eventually translate into higher prices for end-customers.

How to Stop Fuel Theft?

There are two methods that authorities have been using to slow down and eventually eliminate fuel theft.

Fuel dyes are used to color petroleum products a specific tint, so as to allow for easy identification and prevent fraud. However, some dyes can be replicated by criminals – such as those in Ireland who “launder” the fuel.

Molecular markers, which are used in tiny concentrations of just a few parts per million, are invisible and can also be used to identify fuels.

In Tanzania, the initiation of a fuel marking program using molecular markers led to significant increases of imported petrol and diesel for the local market, and a decrease of kerosene.

At the retail level, product meeting quality standards increased from 19% in 2007 to 91% in 2013. Ultimately, this resulted in an increase of tax revenue of $300 million between 2010 and 2014.

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Energy

How Much Solar Energy is Consumed Per Capita? (1965-2019)

This visualization highlights the growth in solar energy consumption per capita over 54 years. Which countries are leading the way?

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How Much Solar Energy is Consumed Per Capita?

The long history of solar energy use dates as far back as 4,000 B.C.—when ancient civilizations would use solar architecture to design dwellings that would use more of the sun’s warmth in the winter, while reducing excess heat in the summer.

But despite its long history, we’ve only recently started to rely on solar energy as a renewable power source. This Our World in Data visualization pulls data from BP’s Statistical Review of World Energy to highlight how solar energy consumption per capita has grown in countries around the world over 54 years.

Solar Success: The Top Consumers Per Capita

Solar energy consumption is measured in kilowatt hours (kWh)—and as of the latest estimates, Australia leads the world in terms of highest solar energy consumption per capita at 1,764 kWh in 2019. A combination of factors help achieve this:

  • Optimal weather conditions
  • High gross domestic product (GDP) per capita
  • Tariffs incentivizing the shift to solar

In fact, government subsidies such as financial assistance with installation and feed-in tariffs help bring down the costs of residential solar systems to a mere AUD$1 (US$0.70) per watt.

RankCountrySolar consumption per capita
(kWh, 2019)
Solar’s share of total
(per capita consumption)
#1🇦🇺 Australia1,7642.50%
#2🇯🇵 Japan1,4693.59%
#3🇩🇪 Germany1,4093.22%
#4🇦🇪 UAE1,0560.77%
#5🇮🇹 Italy9953.40%
#6🇬🇷 Greece9363.08%
#7🇧🇪 Belgium8471.30%
#8🇨🇱 Chile8233.39%
#9🇺🇸 U.S.8151.02%
#10🇪🇸 Spain7972.34%

Source: Our World in Data, BP Statistical Review of World Energy 2020
Note that some conversions have been made for primary energy consumption values from Gigajoules (GJ) to kWh.

Coming in second place, Japan has the highest share of solar (3.59%) compared to its total primary energy consumption per capita. After the Fukushima nuclear disaster in 2011, the nation made plans to double its renewable energy use by 2030.

Japan has achieved its present high rates of solar energy use through creative means, from repurposing abandoned golf courses to building floating “solar islands”.

Solar Laggards: The Bottom Consumers Per Capita

On the flip side, several countries that lag behind on solar use are heavily reliant on fossil fuels. These include several members of OPEC—Iraq, Iran, and Venezuela—and former member state Indonesia.

This reliance may also explain why, despite being located in regions that receive the most annual “sunshine hours” in the world, this significant solar potential is yet unrealized.

RankCountrySolar consumption
per capita (kWh, 2019)
Primary energy consumption
per capita (kWh, 2019)
#1🇮🇸 Iceland0No data available
#2🇱🇻 Latvia0No data available
#3🇮🇩 Indonesia<19,140
#4🇺🇿 Uzbekistan<115,029
#5🇭🇰 Hong Kong<146,365
#6🇻🇪 Venezuela121,696
#7🇴🇲 Oman284,535
#8🇹🇲 Turkmenistan367,672
#9🇮🇶 Iraq415,723
#10🇮🇷 Iran541,364

Source: Our World in Data, BP Statistical Review of World Energy 2020
Note that some conversions have been made for primary energy consumption values from Gigajoules (GJ) to kWh.

Interestingly, Iceland is on this list for a different reason. Although the country still relies on renewable energy, it gets this from different sources than solar—a significant share comes from hydropower as well as geothermal power.

The Future of Solar

One thing the visualization above makes clear is that solar’s impact on the global energy mix has only just begun. As the costs associated with producing solar power continue to fall, we’re on a steady track to transform solar energy into a more significant means of generating power.

All in all, with the world’s projected energy mix from total renewables set to increase over 300% by 2040, solar energy is on a rising trend upwards.

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Energy

Mapped: The World’s Largest State-Owned Oil Companies

State-owned oil companies control roughly three-quarters of global oil supply. See how these companies compare in this infographic.

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Mapped: The World’s Largest State-Owned Oil Companies

View the high-resolution of the infographic by clicking here.

Oil is one of the world’s most important natural resources, playing a critical role in everything from transportation fuels to cosmetics.

For this reason, many governments choose to nationalize their supply of oil. This gives them a greater degree of control over their oil reserves as well as access to additional revenue streams. In practice, nationalization often involves the creation of a national oil company to oversee the country’s energy operations.

What are the world’s largest and most influential state-owned oil companies?

Editor’s Note: This post and infographic are intended to provide a broad summary of the state-owned oil industry. Due to variations in reporting and available information, the companies named do not represent a comprehensive index.

State-Owned Oil Companies by Revenue

National oil companies are a major force in the global energy sector, controlling approximately three-quarters of the Earth’s oil reserves.

As a result, many have found their place on the Fortune Global 500 list, a ranking of the world’s 500 largest companies by revenue.

CountryNameFortune Global 500 Rank2019 Revenues 
🇨🇳 ChinaSinopec Group2$443B
🇨🇳 ChinaChina National Petroleum Corporation (CNPC) 4$379B
🇸🇦 Saudi ArabiaSaudi Aramco6$330B
🇷🇺 RussiaRosneft76$96B
🇧🇷 BrazilPetrobras120$77B
🇮🇳 IndiaIndian Oil Corporation (IOCL) 151$69B
🇲🇾 MalaysiaPetronas186$58B
🇮🇷 IranNational Iranian Oil Company (NIOC) Not listed$19B* 
🇻🇪 Venezuela Petróleos de Venezuela (PDVSA)Not listed$23B (2018)

*Value of Iranian petroleum exports in 2019. Source: Fortune, Statista, OPEC

China is home to the two largest companies from this list, Sinopec Group and China National Petroleum Corporation (CNPC). Both are involved in upstream and downstream oil operations, where upstream refers to exploration and extraction, and downstream refers to refining and distribution.

It’s worth noting that many of these companies are listed on public stock markets—Sinopec, for example, trades on exchanges located in Shanghai, Hong Kong, New York, and London. Going public can be an effective strategy for these companies as it allows them to raise capital for new projects, while also ensuring their governments maintain control. In the case of Sinopec, 68% of shares are held by the Chinese government.

Saudi Aramco was the latest national oil company to follow this strategy, putting up 1.5% of its business in a 2019 initial public offering (IPO). At roughly $8.53 per share, Aramco’s IPO raised $25.6 billion, making it one of the world’s largest IPOs in history.

Geopolitical Tensions

Because state-owned oil companies are directly tied to their governments, they can sometimes get caught in the crosshairs of geopolitical conflicts.

The disputed presidency of Nicolás Maduro, for example, has resulted in the U.S. imposing sanctions against Venezuela’s government, central bank, and national oil company, Petróleos de Venezuela (PDVSA). The pressure of these sanctions is proving to be particularly damaging, with PDVSA’s daily production in decline since 2016.

State-Owned Oil Companies - Venezuela example

In a country for which oil comprises 95% of exports, Venezuela’s economic outlook is becoming increasingly dire. The final straw was drawn in August 2020 when the country’s last remaining oil rig suspended its operations.

Other national oil companies at the receiving end of American sanctions include Russia’s Rosneft and Iran’s National Iranian Oil Company (NIOC). Rosneft was sanctioned by the U.S. in 2020 for facilitating Venezuelan oil exports, while NIOC was targeted for providing financial support to Iran’s Islamic Revolutionary Guard Corps, an entity designated as a foreign terrorist organization.

Climate Pressures

Like the rest of the fossil fuel industry, state-owned oil companies are highly exposed to the effects of climate change. This suggests that as time passes, many governments will need to find a balance between economic growth and environmental protection.

Brazil has already found itself in this dilemma as the country’s president, Jair Bolsonaro, has drawn criticism for his dismissive stance on climate change. In June 2020, a group of European investment firms representing $2 trillion in assets threatened to divest from Brazil if it did not do more to protect the Amazon rainforest.

These types of ultimatums may be an effective solution for driving climate action forward. In December 2020, Brazil’s national oil company, Petrobras, pledged a 25% reduction in carbon emissions by 2030. When asked about commitments further into the future, however, the company’s CEO appeared to be less enthusiastic.

That’s like a fad, to make promises for 2050. It’s like a magical year. On this side of the Atlantic we have a different view of climate change.

— Roberto Castello Branco, CEO, Petrobras

With its 2030 pledge, Petrobras joins a growing collection of state-owned oil companies that have made public climate commitments. Another example is Malaysia’s Petronas, which in November 2020, announced its intention to achieve net-zero carbon emissions by 2050. Petronas is wholly owned by the Malaysian government and is the country’s only entry on the Fortune Global 500.

Challenges Lie Ahead

Between geopolitical conflicts, environmental concerns, and price fluctuations, state-owned oil companies are likely to face a much tougher environment in the decades to come.

For Petronas, achieving its 2050 climate commitments will require significant investment in cleaner forms of energy. The company has been involved in numerous solar energy projects across Asia and has stated its interests in hydrogen fuels.

Elsewhere, China’s national oil companies are dealing with a more near-term threat. In compliance with an executive order issued by the Trump Administration in November 2020, the New York Stock Exchange (NYSE) announced it would delist three of China’s state-run telecom companies. Analysts believe oil companies such as Sinopec could be delisted next, due to their ties with the Chinese military.

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