China To Replace United States As Nigeria’s Largest Crude Importer

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VENTURES AFRICA – Dwindling oil imports by the Nigeria’s major buyer, United States has thrust China to the forefront as an alternative market for the country’s crude oil, Nigerian National Petroleum Corporation (NNPC) Group Managing Director, Mr Andrew Yakubu, disclosed recently at the sidelines of an oil and gas conference in Lagos.

According to the GMD of state-run NNPC, China is a suitable replacement for any shortfall in the United States’ imports. Yakubu said: “The decision of the United States is not driven by the fact that they don’t want to buy our oil; they have other issues. The Shale gas has been discovered and it is a major source of energy. But of course, the good news is that there are other parts of the world that are interested. As you know, major demand growth is going to come from China and the east. So, that is a very good replacement of whatever shortfall we have with the United States.”

Lagos-based newspaper ThisDay reported that the Africa’s second biggest economy’s crude oil export to the United States, which was over one million barrels per day (bpd) in December 2009, had declined to 352,000bpd, representing a loss of about 70 percent of the market.

Statistics indicate that Nigeria was the third-largest supplier of crude oil to the United States in 2010, with the US accounting for 43per cent of Nigeria’s exports. In September 2011, Nigeria’s crude export to the United States dropped to 580, 000 bpd, with the country assuming the sixth position, after Canada, Saudi Arabia, Mexico, Venezuela and Russia.

Nigeria’s crude export to the United States further dwindled to 352,000bpd as at February 2012.

Though refiners in Asia are said to be increasing crude oil imports, it is more difficult to ship crude oil from Nigeria to Asian countries than to the United States because of the long distances.

For instance, the distance from the Shell’s Bonny Export terminal in Rivers State, to Tianjin, China, is 12,172 miles, compared to 5,847 miles to New York Harbour. Thus, Asian refiners demanding for discount to buy Nigeria’s crude.

Refiners that use Nigeria crude oil are also closing plants on the United States’ East Coast, the main destination for Nigerian exports, amid falling returns on investment.

Recent reports indicate that two facilities, representing half of the US’ East Coast crude processing capacity, has halted operations. Sunoco stopped production at the 194,000-barrel per day Marcus Hook plant in Pennsylvania on December 2011 while ConocoPhillips stopped its 190,000-barrel per day Trainer, plant site on September 30, 2011.

Recently, Chinese National Offshore Oil Corporation (CNOOC), one of China’s largest state-run oil and gas producers, agreed to acquire 45 percent stake in the license covering the Oil Mining Lease (OML) 130 field owned by South Atlantic Petroleum. This underlines the increase of China’s appetite for Nigeria’s oil and gas resources.

According to CNOOC Chairman and Chief Executive, Mr. Fu Chengyu, the eventual acquisition of stakes covering the OML would give CNOOC access to “an oil and gas field of huge interest and upside potential, located in one of the world’s largest oil and gas basins”.