Why Nigeria is Losing from US Tight Oil

abarrelfullabarrelfull wrote on 11 Feb 2013 07:38
Tags: nigeria refinery usa

Nigeria-imports - Copy.png

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Imagine you are reliant on a single product for you livelihood, and suddenly supply of competitive product increases significantly. Life becomes a lot more difficult. That is the position that Nigeria finds itself in. From FT Blog

Togo-based Ecobank has said that Nigerian crude oil exports to the US could fall by over a quarter this year

I did a little digging into US imports of Nigerian crude and the picture does not look good.

First we need to remember that Nigeria supplies crude that is light, sweet and has a high gasoline yield. Such crudes are the perfect choice for refineries in the USA that are simple. Easy to process and produces the product you want the most. So US refineries, particularly those on the East coast have been the biggest buyers of Nigerian crude oils.

Now thanks to tight oil formations such as Eagle Ford and the Bakken, the USA is producing more light sweet crude than it knows what to do with. Thus we have a steep drop in the need to import light sweet crude oil.

This graph says it all. Imports have halved in just a couple of years


It is only going to get worse. When phase one of the Keystone XL Pipeline Project is completed later this year, Nigeria's biggest customers, Philadelphia Refinery and Trainer Refinery will finally get their hands on enough domestic crude to replace what they are still having to import.

The price of light sweet crudes will be badly hit, Nigeria, Libya and other light crude producers will not be happy, but refineries everywhere that process light sweet crudes will suddenly have as much cheap crude as they can handle.

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