With closing US market for light sweet crude oil, Nigeria must make conscious efforts to develop new markets for its oil producing companies, according to a team of Platts’ market analysts that hosted a global oil market outlook in Lagos.
According to presentations delivered by different members of the team who held a full day forum for industry analysts and trading companies at Eko Hotel, abundance of light crude oil grades flowing from the shale and tar sand plays in United States and Canada respectively, Nigeria has been pushed out of the American market which hitherto formed destination for over 50 percent of Nigeria’s 2.5 million barrels per day production.
Worse still, with more unconventional oil and gas plays defying the low price regime, new race for market share among big producers in the Middle East have left the market very turgid with different grades for crude oil, filling demand gaps in their key niches in Asia and forcing suppliers to offer discounts that further weaken prices.
Another factor working against the Nigeria crude oil grades, according to the analysts, is improvement in technology which has enhanced refining efficiency across the globe and thinned down the grade differentials between sweet and sour grades.
Also, while some countries that produce heavy crude seek light grades to enhance yield of transport fuels, some that have predominantly light sweet grades also seek sour grades to produce specific products like bitumen and heavy oils. United States, according to Platts, has switched from importation of light sweet crude oil grades to importation of sour grades to blend its ultra light sweet crude from the country’s shale industry.
The situation has further ruled out Nigerian crude from US markets while process efficiency in India and Asia make it cheaper for refining behemoths to prefer heavy crudes from the Middle East. Platts’ analysts spy out little demand for Nigerian crude in fellow OPEC countries with high stock of heavy and sour crude grades.
Ecuador is one of them that seek light sweet grades to enhance production of transportation fuel at its refineries. Ecuador, it was gnatered, seeks light crude to produce more diesel, gasoline at revamped refinery.
According to them, Petroecuador issued a tender to import 30 million barrels of light sweet crude over the course of a year in an attempt to maximize diesel and gasoline production when its Esmeraldas refinery comes back online in the fourth quarter.
According to a tender issued by the company Petroecuador seeks 30 million barrels of low sulfur crude oil with an API gravity of 28 degrees to be delivered in a one-year period.
The state-owned oil company is seeking the barrels “in order to optimize the Esmeraldas refinery operations, once the revamping has been complete,” the tender said.
One trade source called the tender a study to determine if it is economically feasible to import lighter crudes to take advantage of higher runs of diesel and gasoline that lighter crudes will yield at its revamped Esmeraldas, Ecuador, refinery.
The source said that if the tender is awarded, Petroecuador will issue a tender to export the same volume of its own heavy crude. Petroecuador’s Oriente crude has an API gravity of 24 and its Napo crude has an API gravity of 19. Sources said this is the first switch of its kind for Ecuador.
“They are net exporters of crude oil, but someone gave them the idea to make a swap: export Ecuadorean crude and import lighter crudes, since the refinery will be more efficient and capable of reining lighter crudes,” one source said.
“This will produce more gasoline and diesel, and consequently, they will reduce the volumes of imported products.” Petroecuador’s 110,000 b/d Esmeraldas refinery is expected to return to full capacity in the fourth quarter, either in November or December, according to market sources.
In late July, Rafeal Poveda, minister for strategic sectors, said the refinery will be back to 100% of its capacity in November. The improvements, which began in October 2014, include adding a fluid catalytic cracker.
The final cost for restoring the facility will be around $1.2 billion, about $300 million more than originally planned, Poveda said earlier this year. “Before the revamp, the refinery was unable to produce more gasoline and distillates, even with lighter crudes,” one source said. “It is different now. Lighter crude will produce more gasoline and diesel.”
The source said that the swap would enable Ecuador to have additional crude to export, which can be used to pay off loans to China. Another arrangement prescribed by Platts for Nigerian crude oil is government brokered bilateral trade arrangements that commit trading partners to long term supply and purchase of Nigerian crude oil in deals that would not only provide market to existing production but also create market from production growth in the mid to medium term.
Nigeria currently provides large market to a host of industrial products from Europe and Asia including vehicles, micro power generators, industrial equipment and finished consumer products. Platts noted that government’s trade ministries could trade market opportunities with countries that that flood the nation with other goods.
– Sopuruchi Onwuka