Nigeria
has become the first country to completely stop selling oil to the United
States of America, the world’s largest oil producer and consumer, due to the
impact of the shale revolution – an astounding reversal – as the country was
only four years ago one of the top five oil suppliers to America.
According
to the US Department of Energy, Nigeria did not export a single barrel of crude
to US-based refiners in July for the first time since records started in 1973.
Preliminary
data suggest the trend continued in August and September, the London-based
Financial Times reported thursday.
Many oil producers have seen their exports to the US drop as domestic production rises thanks to the use of new technologies such as horizontal drilling and hydraulic fracturing, or fracking. But Nigeria is the first to fully stop exporting crude.
Many oil producers have seen their exports to the US drop as domestic production rises thanks to the use of new technologies such as horizontal drilling and hydraulic fracturing, or fracking. But Nigeria is the first to fully stop exporting crude.
At
its peak in February 2006, the US imported 1.3 million barrels per day (mb/d)
from Nigeria – equal to roughly one super tanker the size of the Exxon Valdez
every day. By 2012, Nigeria was just selling 0.5m b/d, but was still one of the
top five suppliers to the US, alongside Saudi Arabia, Canada, Mexico and
Venezuela. Earlier this year, sales dropped to a trickle of about 100,000 b/d.
And in July, they completely stopped.
Nigeria,
a member of the Organisation of the Petroleum Exporting Countries (OPEC) oil
cartel, is Africa’s largest oil producer and international companies from
ExxonMobil to Royal Dutch Shell and from Total to Chevron operate some of the
country’s major oil fields. But most of them are divesting of these assets in
the country, as they undertake a portfolio rotation of their assets to divert
more resources in shale oil production.
The
shale revolution has affected US oil suppliers unevenly, hitting particularly
hard those in Africa such as Nigeria, Algeria, Libya and Angola, which produce
high quality crude similar to the one pumped in the new oil fields of North
Dakota.
Middle
East producers such as Saudi Arabia and Kuwait have suffered far less as they
pump crude oil of a lower quality that US refiners continue to buy. Saudi crude
oil exports year-to-date to the US have increased over the 2013 level. Kuwait
has also sold more crude to the US so far this year than in 2013.
Overall,
US crude oil imports hit a peak of 10.8m b/d in July 2005. Since then, they
have fallen by roughly a third to hit 7.6m b/d in July as domestic production
boomed.
The
dramatic collapse in Nigerian crude oil exports to American refiners
corroborates a warning a year ago by the Minister of Petroleum Resources, Mrs.
Diezani Alison-Madueke, that shale was “one of the most serious threats for
African [oil] producers”.
Nigeria has offset the impact of the drop in US sales lifting exports towards Asia, with India supplanting the US as Nigeria’s largest importer of her crude oil.
Nigeria has offset the impact of the drop in US sales lifting exports towards Asia, with India supplanting the US as Nigeria’s largest importer of her crude oil.
According
to Platts, a specialised information service for the oil industry, Nigerian oil
sales to Asia’s four largest oil importers – China, Japan, India and South
Korea – have risen more than 40 per cent so far this year over the 2013 level.
Oil
analysts believe that Africa-US oil trade could completely stop in the next two
to three years as other leading exporters, including Angola, Libya and Algeria,
suffer the same fate as Nigeria. If that materialises, Africa will have to find
new customers for its oil, going head-to-head with Middle East producers in the
key Asian market.
Analysts
see the fate that has befallen Nigeria’s crude oil as a warning that the
country must diversify its economic base if it must remain competitive on the
global stage. As other major African oil producers and the Middle East search
for alternative markets in Asia that consume less crude oil than the US,
producers would be forced to sell at a discount to attract their custom.
Even
more worrisome, said an analyst, is the fact that Nigeria would be mistaken by
relying on Asian buyers, as the shale revolution has made almost every country
in the world a potential oil producer. Added to this are several other African
countries such as Ghana, Cote d’Ivoire, South Sudan, Equatorial Guinea,
Ethiopia and Kenya, among many others, that have made commercial oil
discoveries or are in the process of doing so.
What
this portends is that some years down the line, the crude oil market would turn
from a sellers’ market to a buyers’ market, as the likelihood of an oil glut
forces prices down.
Nigeria
has been complacent for too long. The time it should have acted on the
diversification of its economy has probably passed the country by. It has
failed to take advantage of its enormous gas resources by investing more in gas
development for domestic use and new liquefied natural gas plants for export.
The same could be said of other solid mineral resources, which largely remain
untapped.
However,
the reality of the US slamming the door firmly against Nigeria’s oil exports
could be the wake-up call she needs. Nigeria, without doubt, has enormous
natural and human resources that could still be tapped to stem her
over-reliance on hydrocarbon exports.
However,
Nigeria’s leaders would be mistaken it they think that advanced countries in
the West and Asia got to where they are today by solely exporting raw natural
resources that could be subjected to exogenous price movements over which they
have control. It was through manufacturing, the services sectors, trade and
tourism that sustainable diversification was achieved. That is the path Nigeria
must follow, otherwise its future looks bleak.
Tags
Business
Hand of God. Please God render oil useless so Nigeri will know peace.
ReplyDeleteVery soon our eyes wil clear n we will start collecting savings frm our big THIEFS.
ReplyDeleteDid Nigeria decide to stop exporting ? Or was it the US which stopped importing of buying ? This might once again show the dangers of depending on raw materials exports.
ReplyDelete