Nigeria’s oil exports hit by US output, minister admits

Nigeria’s oil minister, Diezani Alison Madueke said on Tuesday that a boost in US oil and gas production had begun affecting Nigerian exports, with the United States a major market for crude from Nigeria, Africa’s biggest producer.

Analysts have previously warned that Nigeria would eventually have to look to different markets to compensate for a fall in exports to the United States, and have predicted its sales could shift toward Asia.

“The world is now becoming even more competitive all around,” Diezani told an annual conference of industry heavyweights in the capital Abuja.

“US shale oil and an increase in their gas production is already affecting our exports to the United States. Bear in mind that the United States is one of our major importers in this sector.”

She said that Nigeria would work to remain competitive, but provided few further specifics.

The International Energy Agency has said the United States could become the world’s biggest oil producer by around 2020. Domestic output has been particularly boosted by new techniques like fracking.

Nigeria is Africa’s largest oil producer, with a current output of around 2.0 million barrels per day.

In January, The Financial Times, quoting Togo-based Ecobank reported today that Nigeria’s crude oil exports to the US could fall by over a quarter this year, from 800,000bpd in 2012 to as low as 580,000bpd in 2013.

Already in January there were signs of stress, said the FT.

Crude oil shipments from Nigeria have, Ecobank says, declined from 75 cargoes in January to a scheduled 59 in March, and there is an unsold overhang of 21 out of 65 February cargoes. This is an unusual situation given that the cargoes contain Nigeria’s premium grades of sweet and light crude, which are usually very much in demand.

As Rolake Akinkugbe, head of energy research at Ecobank, explained to beyondbrics, refiners in Asia are increasingly capable of handling larger volumes of sour crude oil grades, while European refiners are facing pressures on their margins and seeking lower-priced inputs. Neither are looking as favourably upon Nigerian oil grades, which are priced at a substantial premium to the sour grades from the Middle East.

US reduction in the demand for Nigeria’s crude was first hinted by President Barack Obama in May 2012 in a radio-internet broadcast to Americans.

The P.M.NEWS then reported Obama as calling for an end to America’s dependence on foreign energy sources — and to the multi-billion-dollar subsidies given each year to oil companies.

In 2010, Nigeria exported an average of one million barrels daily to the US, making it Americas’sixth largest supplier after, Canada, Saudi Arabia, Mexico, Venezuela and Russia.

“What we can’t do is keep being dependent on other countries for our energy needs,” Obama said in his weekly radio and Internet address.”In America we control our own destiny,” Obama added. “So that’s the choice we face – the past, or the future.”