In a bid to secure more export markets for its crude after losing out on the strategic US markets, Nigeria is considering extending the period of its crude oil lifting contracts beyond the current one-year term, according to the Nigerian National Petroleum Corporation (NNPC). Exports of Nigeria’s major crude grade, Bonny Light, which at its peak produced around 1 million b/d, began declining rapidly from July 2014 following increased shale oil production by the US.
Speaking at an industry conference in Abuja, Joseph Dawha, Group Managing Director, NNPC, said that
while Nigeria is repositioning the destination of its crude to Asia and Europe, it was still looking for more markets for the shipment of its 2 million b/d output. “Strategic repositioning of the destination of Nigeria’s crude trade requires more than a change of destination but must include…longer- term crude sale contracts beyond the current one- year term,” Dawha said in a presentation.
Dawha said fellow African producer, Angola had adopted the strategy with long-term crude contracts to Indonesia and India, adding that Nigeria would bank on its light sweet crude grade which had a competitive advantage in many of the new destination markets. Among the 43 companies that obtained permit for crude lifting contracts last year, 28 winners were Nigerian firms, with two new bilateral government deals with Chinese state refiner Sinopec and India’s state-owned refiner Indian Oil Corporation which will lapse in June this year.
The total contracted volume is expected to be around 1.32 million bpd, the expanded list showed, or about 70 percent of Nigeria’s total crude oil exports, which fluctuate between 1.8-1.9 million bpd. While India and Europe have emerged as the largest markets for Nigerian crude, the OPEC member still struggles to dispose of its oil leading to a growing overhang of unsold Nige- rian cargoes, compounding its economic woes already battered by lower oil prices in the international market.
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To help get round this, Dawha said Nigeria was also considering the direct sales of crude to overseas refineries in new markets, a strategy adopted by fellow OPEC members Saudi Arabia and Kuwait. More Nigerian crude would also be available for the four domestic refineries when ongoing repairs were completed next year and capacity utilization rose to 90 percent of the plants’ combined nameplate capacity of 445,000 b/d, Dawha said.
