Nigeria’s crude exports are expected to rise to 1.66 million by month end from 1.61 million barrels per day (bpd) planned for shipping in April. However the country may struggle to keep its buyers as US shale producers are fighting to take a chunk of the market.
Crude loading programme compiled by Reuters indicated that crude grades affected by restriction including Qua Iboe are back on stream but shale oil may upset market calculations.
A crude destination report published by the Nigerian National Petroleum Corporation (NNPC) for 2016 indicated that US crude oil exports found a path into China and Japan, key markets for Nigeria’s crude futures.
But this is by no means a problem of the past. US oil production reached 9.1 million barrels a day in March from 8.56 million in September 2016, according to data from US Energy Information Agency (EIA).
Shale producers can now turn a profit in some shale basins when oil prices drop to $20 per barrel and current prices hovering around $48 are sufficient to drill new wells in major shale formations.
The implication of this is that Nigeria has a tough fight on its hands to take a firm grip on markets in Asia still recording demand growth.
China’s demand grew by 3.5 per cent to 8.286 million bpd driven largely by independent refiners called ‘teapots’ because of their low cost, refining which targets speed to market at modest margins.
India’s oil splurge reached record levels in 2016 due to strong demand from urban population, rising income and spending which helped transport sector drive demand in fossil fuels.
This is the reality behind Nigeria’s move to settle the first tranche of joint venture cash call areas of $1.5 billion in April.
Ibe Kachikwu, Deputy Petroleum minister in a speech at the opening session of the maiden Nigeria Oil and Gas Opportunity Fair (NOGOF) in Uyo, Akwa Ibom, state capital, said that plans are underway to pay.
“We had reached an agreement with the majors in December. We are trying to finalise the first stage of the payment in April,” said Kachikwu.
Nigeria negotiated a $1.7 billion discount from JV cash call areas of nearly $7 billion owed International Oil Companies, IOCs, repayable over a five year period, a condition for resumption of production in onshore fields by the IOCs.
Nigeria was exempted from Organisation of Petroleum Exporting Countries, OPEC, supply cap deal to help the country shore up production to 2.2 million bpd but production has still not risen to 2 million bpd even as the deal is up for review in June.
Angola and Nigeria have loaded crude cargoes of nearly 2.19 million bpd since February, to Asian markets.
China and India represents the largest market for West African crude grades but shale producers have been nibbling at the edges, waiting for the next uncertainty, for a way in.
“European destinations such as the Netherlands, Italy, United Kingdom, and France rank high on the list of U.S. crude oil export destinations. The second-largest regional destination is Asia, including China, Korea, Singapore, and Japan,” said a recent EIA report on US crude export trend.