July 13, 2024

Nigeria’s crude cargoes face strong challenge from cheaper rivals


Adewale Akintaro

This may sound bad news for the oil and gas sector in Nigeria as customary buyers of Nigerian crude are looking towards cheaper alternative.

This has led to the rise of France as the country’s leading customer.

Leading crude grades of Africa’s biggest oil producer, Bonny Light, Forcados and Brass, are traditionally renowned for being light in sulphur, a quality that has made them the darling of refineries in Europe and Asia.

But the country’s traditional big buyers from India to China are increasing their purchase of US crude, Russian crude and Latin American oil because they see the Nigerian grades as relatively pricey, with traders reluctant to offload the country’s cargoes.

The development poses a risk to Nigeria, which relies on oil exports for more than half of its total foreign exchange earnings.

Statistics gathered by EnergyDay revealed that India purchased N1.3 trillion of Nigeria’s crude oil in the first quarter of 2024, a decline from an average of N2 trillion purchased between 2018 and 2021.

“Buyers are increasingly turning to cheaper alternatives, raising concerns for the country’s revenue stream,”Aisha Mohammed, a senior energy analyst at the Lagos-based Centre for Development Studies said.

The latest tanker-tracking data monitored by Bloomberg showed India is buying more American crude oil as Russian energy flows dwindle amid sanctions.

India’s state-owned oil refiners Bharat Petroleum, Indian Oil, and the country’s leading private refiner Reliance Industries, snapped up nearly seven million barrels of April-loading US crude oil, the largest monthly inflow since last May, traders who asked not to be identified told Keper, a global trade intelligence firm.

Russian crude flows to India surged after the invasion of Ukraine and the OPEC+ producer is still the biggest supplier to the South Asian nation, but tighter US sanctions have stranded cargoes and discounts have narrowed. India has also ramped up purchases recently from Saudi Arabia.

“Given the issues faced with importing Sokol in Russia, it’s no surprise that Indian refineries are turning toward US WTI Midland as their light-sweet alternative,” said Dylan Sim, an analyst at industry consultant FGE.

India’s imports of Russian crude in February were at around 40 million barrels — or almost 30 percent of the country’s overall oil and condensate purchases, according to data compiled by Bloomberg. In 2023, Russia’s share of the Indian market accounted for 39 percent on average.


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