Global oil outlook has shown that Nigeria’s Brent crude remains a ‘hot market brand’ in international oil markets, despite shrinking demands, according to oil industry experts.
This is coming despite recent concerns that Nigeria is already losing ground on its traditional oil markets following decision by Indian oil, a major buyer of Nigeria’s crude, to look towards the United States of America for purchase of 600,000 barrels of oil per day.
Oil industry watchers are however of the opinion that Nigeria’s crude oil will not suffer from India’s decision, as Nigeria can look towards Europe and Asian countries.
The Brent crude, which is light, is seen as choice of virtually most oil companies in Europe and Asia.
BusinessDay findings reveal that in as much as Indian oil is looking towards the United States, Ukraine alongside the Chinese government is looking towards Nigeria to buy its ‘sweet crude’.
“It is not a problem if India is buying from America. America, yes, used to be our biggest customers. But the advantage we have over a whole lot of other countries is that our Brent crude is ‘sweet oil’. It is light and unlike every other oil that may be difficult to process. That is why our oil sells fast at Rotterdam markets, because it is sweet crude,” Hakeem Ali, oil sector analyst, says in an e-mailed response.
The Nigeria’s Brent is a sought after global brand coming on the heels of it being a sweet crude and light for refining, Hakeem states further.
“We go to the market directly using the IoCs. Just like India is looking towards America, Ukraine is looking towards Nigeria, China is looking towards Nigeria. The exit of India is not a major problem. Saudi Araibia is the only country that can rival us globally in terms of sweet crude. If you look at the volume of oil India is buying from us, it is not going to have adverse effects on us, as other countries are also looking towards Nigeria’s oil such as Ukraine and China,” he says.
Also, Adeola Adenikinju, a professor of Energy Economics at the University of Ibadan, says Nigeria may not experience a major setback in losing its traditional oil markets, but there is an urgent need to re-think the oil strategy.
”Nigeria’s Bonny light is great, with no sulphur and easy to refine. That is not to say that there would not be competition. Nigeria needs to balance between domestic processing and export of crude to address concerns of volatility. Nigeria should see crude and gas as engine for domestic growth.
“We need to have our refineries working, revive the gas stream sector, as well as have direct link with refineries abroad, so we don’t sell crude directly. We could process and sell there and make more gains. We must re-think our strategy,” Adenikinju notes.
Available data show, “For India in 2018, Nigeria exported 121 million barrels of crude to India. For other countries the total exports for 2018 show: The United States bought 87 million barrels of oil, Spain bought 61 million barrels, Netherlands 65 million barrels, France 45 million, South Africa 33 million, the United Kingdom 26 million, Canada 22 million, Indonesia 22 million, with Italy making purchase of 16 million barrels of oil.”
Further records show that Nigerians consume 445,000 barrels per day, which still raises concern because they have to be refined outside the country before bringing them in for consumption, which is also taking its toll on the overall economy, as we lose out in the possible gains and value added benefits.
Industry watchers note that the general direction of Nigerian oil exports has been downward over the last five years, as the US-led shale revolution continues to pick up steam.
The real solution they say is to diversify, as they kept raising concern that the nation has built little capacity coupled with no attendant political will to do so.
“Year on Year, the budget benchmark is always premised on the price of crude oil. Despite the increasingly lip service to diversification, the country is still heavily reliant on oil for its budgetary provisions. Efforts have been made in forex restriction and expansion of the Anchor Borrowers’ Scheme by the Central Bank of Nigeria, however, there is still more to be done to stimulate a diversification away from oil,” Celestine Okeke, lead partner, Small and Medium Enterprise Advocacy Initiative, notes.
Furthermore, Adenikinju insists that India is still diversifying its source of supply because of ‘energy risks,’ saying Nigeria may not be exposed to risk shocks because Nigeria oil enjoys premium in OPEC markets.
“Nigeria oil is low in sulphur content, and enjoys high premium in oil markets among petroleum producing countries. However, we must create a franchise market through some discounts that would help us also sustain our relative dominance in the markets,” he says.
The energy professor argues that Nigeria can still maintain its dominance in the market, since some refineries in Asia and Europe have been configured to utilise Nigeria’s type of crude.
He, however, notes that a long-term solution is for the Federal Government to encourage local refineries so that we can dominate the market within the country, and further into the African region.
”We need to change our strategy, and the 8th Assembly must ensure the passage of the Petroleum Industry Governance Bill to ensure a proper fiscal framework that would prepare us for diversification of our economy away from oil,” he states further.
Emmanuel Iheanacho, a former minister and the managing director of Integrated Oil and Gas Services Limited, says the global oil market is dynamic, and as such the Federal Government must quicken up efforts on the Petroleum Industry Governance Bill to explore more opportunities in the market.
Nigeria’s deputy minister of oil resources, Emmanuel Ibeh Kachikwu, says the Nigerian government is not relenting in opening new frontier oil markets, as it is continuously engaging with its global joint venture partners in exploring more opportunities in Nigeria’s domestic markets.
