Earlier in May this year, unplanned outages at Oseberg and Flotta in the North Sea restricted a total of 160,000 bpd of North Sea production, Rystad, said. In addition, scheduled maintenance at Ekofisk, North Sea oil production slumped to 2.28 million bpd in June after a total of about 462,000 bpd were lost to the outages, the energy research firm estimated.
Turnaround activity at the oil fields feeding Ekofisk was the primary driver for the lower North Sea production, accounting for 230,000 bpd of the total outage in June 2019.
There was also a threat of labour unrest. However, Norwegian labour unions and oil rig owners agreed a wage deal only last week, averting the outbreak of a strike that would have halted some of the Nordic country’s crude production and paralyse exploration activity for new resources, the unions said. Almost 1,600 workers had been scheduled to go on strike if the talks had broken down. Oil companies, including Equinor, Eni, Aker BP, Shell and Lundin Petroleum were among the firms that could have been hit, directly or indirectly, by a strike.
But the earlier outages recorded at North Sea oilfields helped put competing Nigerian oil on pace to arrive in Europe at the highest levels in seven months in June, according to Refinitiv Eikon data and traders.
Nigeria exported about 905,000 barrels per day (bpd) to Europe in June 2019, the most since a roughly five-year high of about 1 million bpd in November 2018.
Norwegian and UK offshore fields in the North Sea normally provide a steady supply of lighter crude to refineries feeding northern Europe’s major economies and are traditionally more competitive than Nigerian grades due to their proximity.
Supply of the five North Sea crude grades that underpin the dated Brent benchmark fell to around 720,000 bpd in June, from 948,000 bpd the month before. Also the contamination of a pipeline carrying Russian Urals crude in April interrupted flows to Central and Eastern Europe for a month and left stocks in need of replenishment.
“Nigerian grades are normally middle-distillate-rich and with Ekofisk having undergone maintenance, Nigeria is meeting European demand for this type of crude,” said Ehsan Ul-Haq, lead analyst for oil research and forecasts at Refinitiv.
Higher volumes to Europe, thus, provided an unexpected boon, with Nigerian exports to the United States on the wane for a decade due to increased US shale oil production, and demand relatively steady in Nigeria’s key markets India and Indonesia.
Though European gasoline margins have been middling and especially poor among southern European refiners, several factors may mesh in coming months to support Nigerian differentials, which stand near multi-year highs.
Egina, heavy sweet crude from Nigeria’s new offshore field, has proved consistently popular among refiners in northwest Europe.
“Exports of the grade primarily go to Europe, specifically the Netherlands and France, which combined took around 155,000 bpd in May, or 83 percent of the grade’s exports,” said Mercedes McKay, analyst at energy consultancy FGE.
FRANK UZUEGBUNAM
