The level of economic activity in India is becoming of great importance to Nigeria as the rise of shale oil moves Asia’s third largest economy to the top of the list of receivers of oil shipments from Nigeria.
Nigerian oil exports to India surged in the first quarter (Q1) of 2014 to N516.78 billion ($3.19 billion), from almost negligible levels in 2012, making it number one among the top 10 importers of Nigerian crude between January and March this year, data from the National Bureau of Statistics (NBS) show.
The USA which was top of the list in Q1 2012 when it received N609.66 billion ($3.76 billion) worth of Nigerian crude moved down to the 10th position in Q1 2014 with only N147.4 billion ($909.8 million) of crude imports.
The USA is the world’s largest economy, while India forecast by International Monetary Fund (IMF) economists to become the world’s seventh-largest economy in 2019, is seen as an attractive replacement for the loss of US markets to Nigerian crude.
U.S. oil production has soared over the past five years, while oil imports, especially from OPEC members fell significantly, a development which the minister of petroleum resources, Diezani Allison-Madueke, said was of “grave concern”.
New breakthroughs in technology, such as hydraulic fracturing and horizontal drilling have enabled energy producers to tap previously inaccessible shale oil resources, enabling the shale boom.
Rising American production is also impacting Nigeria (beyond reduced demand) by putting pressure on prices.
Brent crude traded on Tuesday near the lowest since June 25, 2013 or in almost 14 months at $101.89 a barrel on the London-based ICE Futures Europe exchange.
“Oil producers will have to carefully assess their current portfolios and planned projects against lower oil price scenarios,” said PricewaterhouseCoopers (PWC) in their 2013 shale oil report.
“Lower than expected oil prices could also create long-term benefits for a wide range of businesses with products that use oil or oil-related products as inputs (e.g. petrochemicals and plastics, airlines, automotive manufacturers and heavy industry more generally).”
Oil exports to the USA from Nigeria fell 66 percent to 400,000 barrels a day at the end of 2013 from 1.2 million in 2005, according to the USA governments Energy Information Administration (EIA).
Nigeria pumped about 2.15 million barrels of crude a day in June.
The oil and gas industry accounts for 75 percent of the Nigerian government’s revenue and up to 95 percent of dollar earnings.
Analysts say it is crucial to look into ways of facilitating “in-country energy value-add” as opposed to direct lifting of crude, as well as passing the long stalled Petroleum Industry Bill (PIB), to help mitigate the impact of shale.
“In-country energy value-add starts from refining, gas utilisation, and other spin-off sectors from oil & gas, such as petrochemicals,” said Diekola Onaolapo, chief executive of boutique investment bank, Eczellon Capital.
“This is because, while the impacts of shale oil development can be mitigated in the short to medium term, there is a need to be aware of its long term implications.”
Source:- businessdayonline.com
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