Once, US was the highest off taker of Nigerian crude. In 2010, US imported 358.9 million barrels of crude from Nigeria. With the advent of shale oil boom in 2012, US imported 148.48 million barrels of crude from Nigeria and as at 2018, the figure has nosedived to about 36 million barrels.
Current estimates from the US Energy Information Administration (EIA) show that US crude oil production averaged 12 million bpd in January 2019, up 90,000 bpd from December 2018 level, setting yet another all-time US oil output record. A new set of output forecasts show US crude oil production would average 12.4 million bpd in 2019 and 13.2 million bpd in 2020. Thus, there is less likelihood that US import of Nigerian crude will rise to pre-2012 levels again.
Having lost the US market, India may be next on the line. The Asian country imports four out of every five barrels of crude oil it consumes and this has benefitted Nigeria thus far. According to a report published by the Nigerian National Petroleum Corporation (NNPC) on its website in 2018, India was the largest importer of Nigeria’s crude oil in 2017 with over 131 million barrels. However, there are indications India’s uptake of Nigerian crude would diminish in the near future.
The electric vehicles’ gambit
India has approved a scheme to spend $1.4 billion to subsidise sales of electric and hybrid vehicles as part of its efforts to curb pollution and reduce dependency on fossil fuels. The scheme, known as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), would provide subsidies based on the battery capacity of the vehicle, ranging from buses and cars to three-wheelers and motorbikes. The incentives would be applicable only on vehicles costing less than $21,177. The government had set a target in 2017 for all new vehicles to be electric by 2030. Actualizing this means less import of crude oil.
Overhauling rules to drive output
India is overhauling its oil and gas exploration rules in a bid to attract private investment and increase domestic production. The new framework moves away from revenue maximization to production maximization, with a focus on attracting international oil companies.
“Under the new rules, producers will be given pricing and marketing freedom that is currently non-existent in natural gas blocks in India. Explorers will also be given financial incentives for early production from their blocks”, Dharmendra Pradhan, India’s oil minister said.
The Indian cabinet, chaired by Prime Minister Narendra Modi, decided give 66 fields of national oil companies to private operators for increasing the production.
Link-up play with Saudi
Saudi Arabia, the world’s largest crude oil exporter, is prioritizing India as its number one investment destination according to Khalid al-Falih, the Kingdom’s oil minister. Saudi is planning to invest $100 billion in India, with the bulk of funds going toward infrastructure and energy sectors, including downstream segments like refining and petrochemicals.
One of the biggest downstream projects planned in India is the Ratnagiri refinery, a mega refinery and petrochemicals complex on the western coast with a capacity of 60 million mt/year. It is being jointly built by state-run refiners Indian Oil Corp., Hindustan Petroleum Corp. and Bharat Petroleum Corp., with Saudi Aramco and ADNOC signed on for an initial agreement to jointly take a stake in that project.
“We are not limited to that investment, which is the mega refinery. We are looking at other opportunities. India is an investment priority for Saudi Aramco”, said Amin Nasser, Saudi Aramco CEO.
The implication is that India would emerge as number destination for Saudi’s crude, thereby, blighting Nigeria’s exports to the Asian country.