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Netherlands overtakes India as Nigeria’s biggest oil buyer

Crude oil remains Nigeria’s export Achilles heel

The Netherlands has overtaken India as the biggest buyer of Nigerian crude oil, marking a change in the dynamics of the West African nation’s energy exports.

Data from the National Bureau of Statistics showed the Netherlands bought Nigerian crude oil worth N2.5 trillion in the first nine months of 2023, while India’s imports from Africa’s top producer was valued at N1.6 trillion.

Indonesia and France occupied second and third positions as they purchased Nigerian crude worth N1.72 trillion and N1.65 trillion respectively as of September 2023.

Analysts attributed these developments to sanctions over the Ukraine conflict, which have driven India’s refiners to snap up discounted Russian oil, leading to a decline in demand for Nigeria’s crude oil.

“Russian crude has found a welcome market in India, and unless stringent price-cap sanctions are rigorously enforced, which seems likely, India looks to continue buying and processing Russian crudes,” said Rajat Kapoor, managing director for oil and gas at Synergy Consulting.

According to S&P Global Commodities at Sea data, Russia remains India’s primary crude oil supplier, accounting for about 33 percent of the total crude imports, or 1.51 million barrels per day (bpd), in October, and 35 percent or about 1.55 million bpd in November.

“It has a very huge impact on our economy, in terms of helping the Indian economy grow… the price being very reasonable that we get from Russia,” Karim Ramesh, executive director of Oil & Natural Gas Corporation Limited, was quoted as saying at the annual Asia Pacific Petroleum Conference held by S&P Global Insights in Singapore.

BusinessDay’s findings showed some Indian refiners have expressed interest in purchasing discounted Venezuelan crude to diversify their imports.

Analysts said Indian refiners started snapping up crude shipments from Venezuela barely weeks after the sanctions eased, opening a new battleground for Chinese independent refiners that have been the most active buyers of the feedstock from the South American supplier in recent years.

Shipping fixtures showed that India had returned to the market for November- and December-loading cargoes of Venezuelan crude after a three-year suspension since September 2020.

This increase aimed to capitalise on high middle distillate margins by processing fuel oil directly in the secondary unit to enhance middle distillate yields, according to S&P Global.

The rise in cheaper alternative crude oil supplies for India does not bode for Nigeria which is unable to fully exploit its crude oil resources at a time when energy think tanks are placing the commodity’s all-time high demand period as early as the next seven years.

“The relevance of Nigeria in the international oil market is waning and Nigeria seems docile,” Luqman Agboola, head of research at Sofidam Capital, said. “Having oil as a major source of revenue when your major buyers are looking for alternatives will lead to a dead end.”

Apart from alternative crude oil supplies, findings showed the accelerating pace of the global energy transition is posing a further threat to Nigeria’s oil revenue.

Data from the government’s official website showed India wants to build up its manufacturing capacity in renewables, with the government launching a scheme in 2021 to increase “made in India” components for clean energy projects to reduce imports and boost self-reliance.

It offers tax benefits, subsidies for capital costs and concessions to manufacturers that source raw materials from the domestic market.

Under the scheme’s second tranche, 11 mid-to-large manufacturers have benefitted from government allocations of nearly 40 gigawatts of solar photovoltaic module production, with incentives continuing for five years after new plants are commissioned.

The scheme is expected to lead to increased investment and expansion of solar PV manufacturing, as well as a boost to employment, including about 30,000 direct jobs and 120,000 indirect jobs, according to India’s government’s document.

Abhishek Jain, a fellow and director of the Council on Energy, Environment and Water, an India-based think-tank, said micro, small and medium enterprises (MSMEs) have a big part to play in the energy transition as large firms lack a presence on the ground to execute projects.

“But there are challenges smaller companies face – from limited direct interface with the government to exclusion due to steep tender requirements,” he said.

Researchers point out that big companies offer more competitive prices, making clean energy solutions more affordable for customers, and are easier for governments to manage than dealing with many hundreds of smaller players.

But they say MSMEs could create millions of jobs, boost domestic production of solar components and promote energy security if given financial support and better opportunities to bid for projects such as smaller solar plants and solar pumps in rural areas.

While other countries are investing in life after crude oil, Africa’s largest economy is tottering on the brink, and the situation appears not to be getting any better as lack of jobs, failing healthcare, bad roads, insecurity in various parts of the country and poor power supply continues to worsen.

“An unprepared life beyond crude oil could be catastrophic for Nigeria where millions of its people already live on less than $1 a day,” Agboola said.

SOURCE: Businessday