Nigeria’s oil dance: partnerships, surprises, and strategies

By Oluwatobi Ojabello

In the dynamic landscape of global oil trade, Nigeria, one of the biggest sellers of crude in the global oil marketplace has seen volatility in production, investment, divestment, and a switch from the familiar partners.

In 2023, the Netherlands became the top buyer of Nigerian crude oil, beating India, the US, and China, marking a change in the dynamics of the West African nation’s energy exports.

“The Netherlands is replacing Russian crude because of the sanctions on Russian oil and gas in Europe,” Kelvin Emmanuel, an economist said.

According to experts in the energy field, Nigeria’s shift from traditional partners like the United States to a diversified portfolio, including China and now the Netherlands, underscores a strategic move to reduce dependency on any single market.

This diversification safeguards Nigeria against economic vulnerabilities tied to a specific country’s decisions or geopolitical events.

“The Russian crude grade also has lower API density and higher non-transportation fuel ratio that makes it viable for refinery demand that seeks higher quantities of lower distillates,” Emmanuel said.

Data from the National Bureau of Statistics showed the Netherlands was the biggest buyer of Nigerian crude oil amounting to N2.5 trillion in the first nine months of 2023, while India’s imports from Africa’s top producer were valued at N1.6 trillion.

Indonesia and France occupied second and third positions as they purchased Nigerian crude worth N1.72 trillion and N1.65 trillion respectively as of September 2023.

Maryamu Idris, the executive director of Crude and Condensate at NNPC Trading Limited, stated that the decline of 52 percent of exports between Nigeria and India is a result of the ongoing conflict between Russia and Ukraine, which has had a pronounced impact on Nigerian crude inflows in the international market.

While other countries are investing in renewables other than crude oil, Africa’s largest economy is tottering on the brink, and the situation appears not to be getting any better.

“The decline to the ongoing conflict between Russia and Ukraine, which has had a pronounced impact on Nigerian crude inflows in the international market,” Idris said.

According to S&P Global Commodities at Sea data, Russia remains India’s primary crude oil supplier, accounting for about 33 percent of the total crude imports, or 1.51 million barrels per day (bpd), in October, and 35 percent or about 1.55 million bpd in November.

Shipping fixtures showed that India had returned to the market for November- and December-loading cargoes of Venezuelan crude after a three-year suspension since September 2020.

This increase aimed to capitalise on high middle distillate margins by processing fuel oil directly in the secondary unit to enhance middle distillate yields, according to S&P Global.

The rise in cheaper alternative crude oil supplies for India does not bode for Nigeria, which cannot fully exploit its crude oil resources when energy think tanks are placing the commodity’s all-time high demand period as early as the next seven years.

“The relevance of Nigeria in the international oil market is waning and Nigeria seems docile,” Luqman Agboola, head of research at Sofidam Capital, said. “Having oil as a major source of revenue when your major buyers are looking for alternatives will lead to a dead end.”

In 2021, Nigeria sold $41.8 billion worth of oil to India making it one of the top oil sellers globally. But things started to shift in 2022, with Spain becoming Nigeria’s biggest oil customer according to the report by OEC World.

According to the Nigerian Bureau for Statistics (NBS) in the third quarter of 2022, Spain was Nigeria’s biggest crude oil customer. India, France, Netherlands, Indonesia, and the United States are the top five.

While other countries are investing in renewables other than crude oil, Africa’s largest economy is tottering on the brink, and the situation appears not to be getting any better as lack of jobs, failing healthcare, bad roads, insecurity in various parts of the country and poor power supply continue to worsen.

The largest economy in Africa has, in recent times, also invested in the Floating Liquefied Natural Gas (FLNG) plants. The latest was Nigeria’s UTM Offshore joining forces with the state-owned NNPC and the Delta State government

The final investment decision for the 1.5-million-tonne-per-annum FLNG vessel is scheduled for early 2024, contingent upon securing adequate financing and finalising a ratified deal for utilising associated gas from Yoho.

The project’s equity distribution assigns 20 percent, 72 percent, and 8 percent stakes to NNPC, UTM Offshore, and the Delta State Government, respectively.

In addition to producing more than 300,000 metric tonnes of LPG (cooking gas) earmarked for the domestic market, the project partners have highlighted its potential to revolutionise the nation’s power and industrial sectors.