NEWS that South Africa will probably stop importing Nigerian crude once Iran resumes its oil exports sent jitters last week through the west African country, whose oil revenues have already been battered by sliding oil prices. Add to this the recent ending of washington’s embargo on US oil exports and Nigeria is rightly concerned about its ability to compete in a global market, which seems even more flush with crude. India has offered some consolation, pledging
to ramp up its crude imports from Nigeria amid a stronger focus on Africa. Nigeria is pinning its hopes on the veracity of forecasts that India will, by 2030, rely on imports for a massive 90% of its growing crude needs – and that Nigeria will be first in line for a share of that growth. south Africa The worst of last week’s news came from the South African Petroleum Industry Association (SAPIA), whose executive director, Avhapfani Tshifularo, told journalists that the lifting of sanctions against Iran would probably see the country stop buying crude from Nigeria. South Africa’s shift towards Iran was represented as a return to previous form. The official noted that Nigerian and Saudi Arabian oil had
helped plug a supply gap that opened up when sanctions were imposed on Iran. “The re-emergence of Iranian crude oil provides options for those willing to buy from Iran,” Tshifularo said. “Iranian imports are likely to displace the Nigerian and Saudi Arabian crudes, since they seem to have filled the gap since South Africa stopped importing Iranian crude oil.”
South Africa’s oil imports from Nigeria did indeed rise sharply in 2013. The oil industry is in a very different shape now, though, and losing those additional sales will be painful for Nigeria, whose non-oil exports are also shrinking.
Nigeria earned 5.27 trillion nairas (US$26.5billion) from oil exports in the first nine months of 2015, down 45.39% from the 9.65 trillion (US$48.4 billion) it earned in the same period a year earlier, according to Nigeria’s National
Bureau of Statistics. India There are also fears that Iran – which is said to be targeting India as the main destination for its crude and is already in supply talks with the country over exporting thousands of barrels could erode Nigeria’s share of Asian demand.
India appeared intent on assuaging those fears last week, with Indian Petroleum and Natural Gas Minister Dharmendra Pradhan saying that, as it moves to diversify its supply base, state-owned Indian Oil Corp. (IOC) had agreed to nearly double the volume of oil it buys from Nigeria via a term contract. “Nigeria has now agreed to increase the term contract from 1.7 million tonnes per year [34,000 barrels per day] to 3 million tonnes [60,000 bpd] in 2016,” he said, noting that Nigeria’s low-sulphur crude suited Indian refineries. Although term contracts typically involve lower prices than spot purchases, locking in IOC as a term buyer represents something of a
coup for Nigeria, especially at a time when the global energy industry is pinning its hopes on Indian demand taking up some of the slack from a slowing China. IOC buys around 8 million tonnes of Nigerian crude per year (160,000 bpd), most of it via volatile spot markets. Nigeria is India’s third biggest oil supplier, having sold it 11.59 million tonnes (85 million barrels) of oil in the first half of this fiscal year, following Saudi Arabia with 19.56 million tonnes (143.4 million barrels) and Iraq with 17.01 million tonnes (124.7 million barrels). India has recently taken a more active stance
on its involvement in Africa beyond just Nigeria. It has in recent months embarked on a charm offensive in the continent, seemingly to ensure that it has the supplies needed to fuel an economy that many believe will overtake China’s within a decade to become the world’s growth engine. India sourced nearly one-third of the 99.36
million tonnes (728 million barrels) of oil it imported in the first half from Africa and expects this proportion to grow.
“In the field of hydrocarbons, we want to increase our co-operation with Africa,” Pradhan said last week. “The experience with Africa has been very good in the past and whether oil prices increase or decrease, our engagements with Africa will increase.”
The minister said India imported 32 million tonnes (643,000 bpd) of crude in 2014 from Africa, “including 3 million tonnes [60,000bpd] from North Africa and 29 million tonnes [582,000 bpd] from west Africa, mainly from Nigeria and Angola,” he said. “This constitutes approximately 16% of our consumption. This is going to increase in the coming years.” while India may be talking up its engagement, the tide does not appear to be in Nigeria’s favour.
By Helen Castell, AfrOil