Russia-Ukraine war stunts Nigeria’s crude flow in world markets – NNPC

• India’s demand drops by 52% to date 
• Asian market demand dips generally
• Europe’s crude flow increases yet to impact economy

Ben Eguzozie 

Nigeria’s crude oil flows in the international markets has been greatly stunted by the war between Russia and Ukraine leading to unimaginable dip in demand from the once-dependable Asian market at the onset of hostilities in the Eastern bloc, according to the Nigerian National Petroleum Company Limited (NNPC Ltd) in an insight into effects of the crisis on the nation’s mono-product economy.

Maryamu Idris, executive director, crude and condensate at NNPC Trading Limited, in a panel presentation at the Argus European Crude Conference in London, said, in addition to the substantial price shocks impacting commodity and energy prices globally, the Russia–Ukraine conflict has triggered a situation where India, a primary destination for Nigerian grades, increased its appetite for discounted Russian barrels to the detriment of some Nigerian volumes.

“To illustrate the extent of this shift, Nigeria’s crude exports to India dwindled from approximately 250,000 barrels per day (bpd) in the six months preceding the February 2022 invasion of Ukraine to 194,000 in the subsequent six months afterwards. So far, this year, only around 120,000 bpd of Nigerian crude volumes have made their way to India,” she said.

On the other hand, she noted that Nigerian crude flow to Europe has increased in a bid to fill supply gaps left by the ban on Russian crude, indicating that six months before the war, 678,000 bpd of Nigerian crude grades went to Europe, compared to 710,000 bpd six months later and 730,000 bpd so far this year.

“This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners. 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 our latest addition—Nembe Crude—fits well into this basket. 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,” Idris said.

On production challenges, she observed that, like many other oil-producing countries, Nigeria had faced production challenges aggravated by the COVID-19 pandemic, including reduced investment in the upstream sector, supply chain disruptions impacting upstream operations, ageing oil fields, and oil theft by unscrupulous elements. These factors, she said, contributed to production declines in the second half of 2022 and early 2023.

However, the European crude flow increases have not translated to a richer economy back in Nigeria. The African top-oil producer faces a record inflation in history at 26.7 percent amid rising food prices. The consumer price index (CPI) which measures the rate of change in prices of goods and services, rose to 26.72 percent in September this year — up from 25.80 percent in August. 

Till date, Nigeria remains the only oil producing nation that imports 100 percent its domestic petroleum needs. The four refineries have been left to die slowly. The outgone Muhammadu Buhari administration which promised returning the Port Harcourt refiner to production — three times failed to make any headway — despite a $1.5 billion rehabilitation contract award for the 210,000 bpd nameplate capacity refiner. 

The current President Bola Tinubu government has postured as if the refiners do not exist. Its fuel subsidy removal in May has thrown the nation into its worst socio-economic situation. It is yet to be afoot with any economic recovery policy. So far, poverty and hunger have multiplied.

For Idris, the NNPCL director, the challenges are fast becoming a thing of the past with the introduction and implementation of a new framework for the domestic petroleum industry (the PIA of 2021), rejuvenating the business landscape, and re-positioning NNPC Limited to adopt a more commercial approach to the management of the nation’s hydrocarbon resources.

According to her, 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.

“NNPC Limited is championing concerted efforts in partnership with host communities and private stakeholders to address the security and environmental challenges in the Niger Delta to further fortify production growth. Suffice to say 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. This, we believe, is just the beginning of our production rebound,” she said.

Idris said, in addition to sustainably growing upstream production volumes, NNPC Limited was also increasing its participation in the downstream sector in line with a ‘wells-to-wheels’ approach, taking the country’s unique hydrocarbon molecules as close as possible to end-users. The vehicle for this, she said, is the restructured NNPC Trading Company, focused on growing NNPC’s presence in the global market for crude, condensate, gas, and petroleum products.

The Argus Crude European Crude Conference panel session this year is held with the theme, “The Invisible Hand: How Are Shareholders and Asset Managers Meeting the Crude Industry? What Does This Mean for the Future of Crude in Europe?”