A Review of the Nigerian Energy Industry

Snubbed by US, Nigeria turns to Russia, Asia

cargo-ship-vlcc-oil-tanker-1*India becomes number one oil purchaser
*US export plan brings fresh pressure on Nigerian crude

CHUKS ISIWU, OSCARLINE ONWUEMENYI & IKE AMOS 18 August 2014, Sweetcrude, Lagos – Nigeria has sought investment from the Russian business community to take advantage of its enormous human and natural resources, and invest in its petroleum value chain – upstream, downstream, and gas. It has also turned to the East European country as well as Asia and South America for markets for its crude oil. The latest foray by the government comes in the wake of declining importation of petroleum products by the United States of America which, hitherto, had been the biggest buyer of Nigerian crude.
With American imports from Nigeria declining to less than three percent of its global imports over the past few months, Asian countries like India, China and Malaysia have become the major importers of Nigerian crude, accounting for more than half of the nation’s current export. South America’s giant, Brazil has also entered the equation, snapping up sizeable volume of crude oil from Nigeria. European countries – the Netherlands and Spain – also remain major oil trading allies of the country.
The Nigerian National Petroleum Corporation, NNPC, justified the country’s new strategic foray towards Asia and South America in the light of the snub by the United States, even as it notes that Nigeria would not ignore any market in its quest to remain competitive in the global oil and gas industry.
“India is now the largest importer of Nigeria’s oil replacing the US. The US merely imports about 250,000bpd, they usually imported over a million. So that market has moved to Asia, and we are placing more and more of our cargos in Asia.
“Asia is an important market to us at the moment, and in that respect we respect all markets. The important thing is to make sure that you are selling the products that you have and you do not ignore any market,” explained Dr. Tim Okon, the Co-ordinator, Corporate Planning & Strategy, as well as Director of Transformation, NNPC, on the sidelines of 21st World Petroleum Congress, WPC, in Moscow, Russia.
Nigeria’s stated ambition in participating at the World Petroleum Congress was to assess the global business and opportunities available in the petroleum industry to enable it position itself as a major competitor in the hydrocarbon market. According to Okon, as a natural resources rich country, Nigeria needed to do a better job in developing these resources and translating them to the wider economy.
Along that line, Nigeria had, at the Petroleum Congress, wooed Russia not just as market for its crude but for investments in other aspects of the oil and gas sector. But, the Nigerian government’s outreach to the oil-rich nation came with a warning from the Nigerian ambassador to the Russian Federation, Chief Asang E. Asang, who observed that it would be fraught with challenges because economic relations between both countries is historically low compared with other nations. This is due to the fact that there were no trade routes between the two countries before now.
“We literally had no serious trade relations between Nigeria and Russia because we had no relationship, no cultural bond, and no trade,” Ambassador Enag said.
Besides, he noted that Nigeria had almost similar natural resources with Russia and would appear to be in direct competition, saying, “Everything Nigeria has, Russia too has, including hydro-carbons. Nigeria has a population of 160 million, Russia has 150 million. While Nigeria has low technology, Russia has high technology.”
While still concerned with the challenges of wooing Russia, latest figures from the NNPC on the marketing of Nigeria’s crude showed that India, Netherlands and Brazil are top on the list of buyers of the Nigerian product.
Nigeria exported 65.7 million barrels of crude oil in February this year, netting N1.125 trillion revenue according to data for that month released by the NNPC. Of this volume, India purchased 10.44 million barrels, followed by the Netherlands, with 9.385 million barrels.
Nigeria exported 6.922 million barrels of crude to Brazil; 6.18 million barrels was exported to France; 4.0 million barrels was exported to South Africa, while Spain accounted for 3.971 million barrels of Nigerian crude.
Others purchases, according to the NNPC, are the United Kingdom —3.351 million barrels; the United States — 3.048 million barrels; Indonesia — 2.85 million barrels and Italy — 2.75 million barrels.
There was a slight difference in the export figures for January, which revealed that India, Netherlands and Spain were the highest buyers of Nigeria’s crude oil, accounting for 45.01 per cent of the total crude export in the month.
In January, Nigeria’s total crude export was 65.305 million barrels, up by 1.19 per cent from 64.537 million barrels in December 2013. As in February, India was the highest recipient of Nigeria’s crude oil in January, accounting for 18.09 per cent of total crude export with 11.811 million barrels of crude oil. The Netherlands followed with the purchase of 8.889 million barrels of crude, while Spain received 8.695 million barrels.
Having obviously found new markets after exports to the US market had dwindled by 91 per cent this year and the US had dropped from the first to 10th position in the list of buyers of Nigerian crude, observers warn that US plan to enter the international market with its oil portends greater challenge for Nigeria and threat to revenue receipts.
They maintain that with this development, Nigeria and other oil exporting countries are bound to lose considerable shares of their current markets.
The US Commerce Department had three months ago given the green light for the export of ultra-light crude oil or condensates to two Texas-based companies, Pioneer Natural Resources and Enterprise Products Partners, from August this month.
Experts say this marks an end to the ban on export of unrefined oil introduced by the US to arrest rising fuel prices following the 1973 Arab oil embargo.
Energy analyst at Ecobank, Dolapo Oni, says the decline in US imports of Nigerian crude has increased the amount of crude oil for which the country is seeking new markets, but stressed that by the time the US enters the international market with its crude, it would reduce Nigeria’s market share because the US exports would be aiming for the same markets Nigeria’s crude currently services.
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