A Review of the Nigerian Energy Industry

Why India may completely dump Nigeria’s oil

Barrels of Nigeria’s Bonny Light crude oil

OpeOluwani Akintayo

11 October 2017, Sweetcrude, Lagos – The United States has offered India a $2 discount against benchmark Brent crude prices, on every barrel of oil the Asian country buys from the US.

This is the explanation for the recent resort by India to purchasing the US product, in preference for crude oil from its erstwhile customers – Nigeria and member-nations of the Organisation of the Petroleum Exporting Countries, OPEC.

Early in the month, news broke that India, which imports 400,000 barrels per day of Nigeria’s crude, had received its first two million barrels cargo of US’ shale at the stated discount.

This is a direct threat to Nigeria’s 400,000 barrels per day crude oil exports to the Asian country and an estimated US$10 billion annual income that comes with it.

The US re-entered the oil export market last year, bringing increased competition in the market.

A US government official said the shipment containing two million barrels of oil to India comes at $2 less per barrel than Dubai crude, which makes up a large part of the crude oil mix that state-owned refiners process in India.

By next year March, Indian Oil and Bharat Petroleum Corp. Ltd would have received eight shipments from the US, tenders signed by both countries have shown.

“The US’ entrance to the export market brings down costs for consumers and is an opportunity for India to diversify its sources of import,” said the cited official.

The shipment is part of the strategic energy partnership Prime Minister Narendra Modi and US President Donald Trump agreed to form at a June meeting in Washington.

US crude oil exports jumped to 1.98 million barrels per day, mb/d, last week of September, surpassing the 1.5mb/d record set the previous week, the US Energy Information Administration, EIA, said.

According to the EIA, the $2 discount has made the US oil attractive on world markets. Analysts have also remarked that the US entrance into the export market brings down the cost for consumers and is an opportunity for India to diversify its sources of import.

This also confirms speculations that the US may be repositioning itself as the next biggest thing to happen to the world’s oil sector.

India imported 214 million tonnes of crude oil in 2016-17, 5.4 percent more than the country imported a year ago. With the ambition of becoming a regional refining hub, India is adding more refinery capacity.

Nigeria is currently India’s largest African crude oil supplier, exporting 400,000b/d at US$10 billion annually.

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