By Prince Okafor
There are indications that Nigeria’s crude oil biggest buyer, India has started looking up to the United States for the product. According to Platts, “Indian Oil Corporation (IOC) issued a tender for one Suezmax or VLCC cargo of US crude loading in December, along with one Suezmax or VLCC of West African crude.
“This followed news earlier in the week that the state-run company expected a second US crude cargo containing around 2.2 million barrels to arrive on the west coast by the end of October.
“International Oil Companies, IOCs, the country’s flagship refiner, has contracted 3.8 million barrels of US crude since July. Indian refiners have purchased heavier MARS crude from the US, as well as light sweet barrels.
“Other state-run refiners like Bharat Petroleum Corp. Limited (BPCL) and Hindustan Petroleum Corp. Limited (HPCL), which are also key buyers of Nigerian crude, have also recently purchased US oil.”
An unnamed Nigerian crude trader stated, “US grades are a very good option for anyone searching for light grades considering the Brent/WTI spread… if you have a grade that is marked on Dated Brent then it will likely see dropping differentials.”
The Nigerian Bureau of Statistic, NBS, had stated that: “The fiscal statistics on government revenue and expenditure for July 2017 reflected that total gross oil revenue was put at N362.43bn as against N254.02bn in June 2017.
“Crude oil sales accounted for the larger chunk of the oil revenue as N188.15bn was generated from crude oil sales while gas sales generated N29.69bn. The least oil revenue came from rent and gas flared penalty with N0.044bn and N0.184bn generated respectively.”
Also, South Korea’s largest refiner, SK Innovation, had made its first purchase of U.S. crude, placed order for over one million barrels.
Nigeria produces light sweet crude, a similar grade with the U.S. WTI that refiners in Asia are now rushing because of favourable price and shorter shipping distance. The nation has one of the world’s highest production cost per barrel of crude oil, thus making its crude’s price uncompetitive especially in low price regime.
According to trading sources, “The competition that Nigerian crude oil cargoes has faced from US crude oil grades in Northwest Europe over the past two years has begun to expand into other regions.”
In an interview with S&P Global Platts, the General Manager of Nigerian National Petroleum Corporation, NNPC, Mele Kyari, had said: “In the short term we are not worried about rising US crude exports, because we actually sell into the US today so there is a reverse flow of trade, going from Nigeria to the US. “So far this year, 17 percent of Nigerian crude exports have been to the US, which was a sharp rise from few years ago. Indeed, since the US started exporting crude in 2015, Nigeria’s exports to the US have increased. By comparison in 2014, only 3.1 percent of Nigerian exports went to the US.”
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Reporting by Naija247news in Lagos, Nigeria.
