How Europe’s Energy Crisis Boosts Nigeria’s Oil Exports Amid Russia-Ukraine War

Nigeria benefits from increased demand from Europe, which is facing an energy crisis due to the ban on Russian oil.

by Motoni Olodun

The ongoing war between Russia and Ukraine has disrupted the global oil market, affecting Nigeria’s crude exports to Asia. However, Nigeria has also benefited from the increased demand from Europe, which is facing an energy crisis due to the ban on Russian oil.

Nigeria is one of the largest oil producers in Africa, with an average output of about 1.7 million barrels per day (bpd) in 2023. The country exports most of its crude to Asia and Europe, competing with other light and sweet grades from the Middle East and the North Sea.

However, the war that broke out in February 2022, when Russia invaded Ukraine over a gas pipeline dispute, has changed the dynamics of the oil market. The European Union and the United States imposed sanctions on Russia, including a ban on its oil exports. This created a supply gap in Europe, which relies heavily on Russian oil for its energy needs.

According to Maryamu Idris, Executive Director, Crude & Condensate, NNPC Trading Limited, Nigeria’s crude exports to India, one of its main customers in Asia, dropped from about 250,000 bpd in the six months before the war to 194,000 bpd in the six months after the war. She said India increased its appetite for discounted Russian barrels diverted from Europe to Asia.

However, she also noted that Nigeria’s crude exports to Europe rose, aiming to bridge the supply void created by the ban on Russian oil. She said that six months before the war, 678,000 bpd of Nigerian crude were destined for Europe, while six months into the war, this figure increased to 710,000 bpd. The current year has seen exports reach 730,000 bpd.

“This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners,” she said at the Argus European Crude Conference in London.

She also explained that several Nigerian distillate-rich grades have become a steady preference for many European refiners, given the absence of Russian Urals and diesel. Forcados Blend, Escravos Light, Bonga, and Egina appear to be the most popular, and Nigeria’s latest addition – Nembe Crude – fits well into this basket.

Idris added, “This was a strong factor behind our choice of London and the Argus European Crude Conference as the most ideal launch hub for the grade.”

Nembe Crude is a new grade that was resurrected after incidents of sabotage on the Nembe Creek Trunk Line (NCTL) hit output. The first cargoes of Nembe were sold in October, with two 950,000 barrel shipments sold to France and the Netherlands.

Idris acknowledged that Nigeria faced production challenges, such as reduced investments, supply chain disruptions, ageing oil fields, and theft. These factors contributed to declining production in the latter part of 2022 and the beginning of 2023.

However, she said that NNPC Limited has secured vital partnerships with notable financial institutions to promote upstream investments to restore and sustainably grow production capacity in the coming years.

“We have already begun seeing significant progress on the rebound. In September 2023, Nigeria recorded its highest crude oil and condensate output in nearly two years, reaching 1.72 million barrels per day. We believe this is just the beginning of our production rebound,” she said.

Nigeria’s oil industry is optimistic that it can overcome the challenges posed by the war and the global market fluctuations. The country hopes to increase its market share and revenue from its oil exports, especially to Europe, facing a severe energy crisis pushing gas and electricity prices to record highs.

Source: Business Insider Africa

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