Nigeria’s crude oil is finding fewer buyers as the global oil market goes through deep changes with newcomers entering, exports increasing from former net oil importers and a global push for low carbon future.
South Africa, a newcomer into the oil and gas market has made some significant gas discovery that can serve its six refineries for the next four years. This means it would import less from Nigeria.
In the last three months of 2018, the value of crude oil imports by Africa’s most industrialised economy from Nigeria was N340 billion, according to Foreign Trade Statistics for the fourth quarter of 2018, published by the National Bureau of Statistics.
Total Plc.’s major deep-water discovery offshore South Africa is creating a potential new wave of oil majors drilling in the area, hoping to find the next billion-barrel discovery.
Some of Nigeria’s big crude oil customers are from Asia, but Africa’s biggest crude producer’s share of this market is shrinking because the United States of America as a matter of foreign policy plans to pump and export more crude oil to Asia. In the three months ending December, India imported crude oil worth N730 billion and Indonesia imported N248 billion worth of crude oil, from Nigeria.
“Greater US exports to global markets strengthen oil security around the world. Buyers of crude oil, particularly in Asia, where demand is growing fastest, have a wider choice of suppliers” Paris-based International Energy Agency said in a new report, ‘Oil 2019 – Analysis and Forecast to 2024’.
This gives Asian buyers more operational and trading flexibility, reducing their reliance on traditional, long term supply contracts that Nigeria has been a beneficiary of.
On 11 March, Mike Pompeo, the United States Secretary Of State met with top oil executives seeking to get them to help the administration’s effort to boost crude exports to Asia and to support its policy of isolating Iran, according to three people at two companies briefed on the agenda.
“We are stuck until the Petroleum Industry Governance Bill is passed. Our reserves have been capped because there are no new investments. There are no new investments because investors do not see clarity” said Ronke Onadeko, an expert in Nigeria oil and gas sector business development.
Nigeria’s oil reserve decreased to 36.247 billion in 2011 from 37.200 billion recorded in 2010, while in 2012 there was relative improvement to 37.139 billion but went down again to 37.071 billion in 2013. In 2014, it stood at 37.448 billion before sliding down to 37.062 in 2015 while in 2016 it stood at 37.453 billion.
Abayomi Fawehinmi an oil expert in a Lagos based oil firm said Nigeria’s inability to attract investment to its oil fields is obstructing growth and efficiency in the sector.
“When last did we do oil bid rounds to sell acreages?” Fawehinmi asked on a phone interview with BusinessDay.
Oil producing economies and international oil companies are also faced with the challenge posed by the global push to reduce net carbon footprints and transition towards a low carbon future. This again means less demand for fossil fuels in the medium and long term. To deal with this oil majors are investing in cleaner energy.
In 2018, Shell invested $800 million in solar and wind as part of its new energy business. The British-Dutch oil and gas company has also acquired 310, 000 acres off the Coast of Massachussets and New Jersey with potential to generate 4.1 Gigawatts of electricity.
BP Plc, a British multinational oil and gas company is investing in a solar development company called Lightsource BP in which it owns 43 percent equity stake. Lightsource BP has doubled its global footprint over the past year, with presence in 10 countries now. It recently announced it would enter Brazil.
“We have to move from being pure-play oil and gas companies into broader energy businesses. Our focus has to be on developing an energy system that is cleaner, better and kinder to the planet” Bob Dudley, BP CEO said at CERA Week, U.S.’ biggest oil and gas industry event, in Houston, Texas.
STEPHEN ONYEKWELU
