Drop in US oil import from Nigeria valued at $2.7bn in Q1

The imports of Nigerian crude oil by the United States (US) continued on a downward trend in the first quarter (Q1) of this year, with a reduction of 25.1 million barrels in the quarter, compared to what the country imported from Nigeria in the same quarter last year.

With average crude oil price (Bonny Light – Nigeria’s reference crude) of $110.19 in January, according to data from the Central Bank of Nigeria (CBN), the value of the loss of 25.1 million barrels is over $2.7 billion.

Nigeria’s revenues from crude oil have been declining in recent times, due to large-scale oil theft and the rise of shale oil production in the US, resulting in sustained cutbacks in US imports of Nigerian crude and moving the world’s biggest oil-consuming country closer to energy independence.

US imports from Nigeria in the first quarter of 2014 declined to 5.6 million barrels from 30.7 million barrels in the first quarter of 2013, according to data from the Energy Information Administration (EIA), the statistical arm of the US Energy Department.

The US imported 1.58 million barrels of Nigerian crude in January, 1.07 million in February and 2.96 million in March, compared to 13.63 million, 5.43 million and 11.66 million, respectively, imported in the same period in 2013.

Nigeria, Africa’s top oil producer, supplies the world with Bonny Light, a high-grade crude oil most preferred in many parts of America before the discovery of shale oil in the US. The light-sweet nature of shale oil has resulted in strong contraction of US demand for Nigeria’s light sweet crude.

Osam Iyahen, senior vice president, oil and gas, Africa Finance Corporation (AFC), who noted that Nigerian crude exports to the US declined from over 1 million barrels per day (bpd) in 2004-2007 to approximately 260,000bpd in 2013, said the decrease in exports to the US has been matched by an increase in demand from and export to Europe and Asia.

“While we can expect further growth in Nigeria’s oil trade with India and many European countries, it is not envisaged that this growth will fully make up for the scale of the drop in the country’s exports to the US. Additionally, there is a risk to Nigerian crude exports to India and Europe if Libyan and Iranian crude supplies return to the market,” Iyahen said in an email response to questions from BusinessDay.

He said it was also important to highlight that the capacity of Asia to absorb large quantities of light sweet crude from West Africa was limited due to the nature of Asia’s downstream sector, adding, “Older refineries and the large-scale refinery projects in Asia process the cheaper and heavier crude oil such as those from the Middle East, as opposed to light-sweet crude oil, such as Nigeria’s.”

Iyahen said Europe had traditionally been a large market for Nigerian crude, and as North Sea production declined, Nigeria could increasingly ship crude to the region.

“European imports of Nigerian crude increased by 40 percent in both 2012 and 2013. India increasingly appears to be offering new market opportunities for Nigerian crude oil exports, particularly as it seeks alternatives to Iranian and Libyan crude. In May 2013, India effectively overtook the US as the top importer of Nigerian crude,” he said.

Wumi Iledare, president of the International Association for Energy Economics (IAEE) and director, Emerald Energy Institute, University of Port Harcourt, said there were destinations Nigeria could pursue in the short run, even as it develops a more pragmatic petroleum policy.

“Good and open outlets to explore include Singapore, South Korea, India, and the emerging economies in Asia. I am leaving China as the more important ally Nigeria can also do business with, but we as a nation need to be careful and establish proper guidelines as we open our resources for China’s use. But these market outlets should be in the short run,” he said.

Iledare said a more pragmatic, sustainable, and more worthy-of-pursuit outlet for Nigeria’s crude was the domestic markets for petroleum products, adding that the country should encourage investments in both the midstream and downstream sectors for its crude petroleum.

“Developing the downstream and midstream sector of the oil and gas industry may at the end be a good unintended benefit of the US shale revolution to Nigeria,” he said.

Diezani Alison-Madueke, minister of petroleum resources, had last Wednesday observed that Nigeria’s crude oil exports to the US had dropped significantly, stating that dramatic shift in the position of the US from being Nigeria’s biggest crude oil buyer to near zero called for urgent reform of the Nigerian oil sector and the passage of the Petroleum Industry Bill (PIB).

Crude output in the US will average 8.46 million bpd this year and 9.24 million in 2015, up from 7.45 million last year, the EIA said in its monthly Short-Term Energy Outlook on May 6.

In April this year, it emerged that Argentina had for the first time ordered for Nigerian crude oil cargo as that country’s state-run oil company YPF awarded a tender to buy a 1 million-barrel cargo of Nigerian Bonny Light crude to trading firm Vitol.

In March, Taiwan was said to have added Nigeria as a new supplier, as the country bought 947,000 barrels from Nigeria, according to Taiwan’s Bureau of Energy.

Nigeria intends to overhaul its oil and gas industry through the passage of the long-delayed PIB, which is currently in the National Assembly.

FEMI ASU