* Nigeria key oil producer pumping 2 mln barrels a day
* Global prices would spike if Nigerian "sweet" oil lost
* Nigerian oil exports worth around $250 million a day
* Abuja government likely to compromise to end strike
By Christopher Johnson
LONDON, Jan 13 The world would face a
Libya-scale supply problem if Nigerian oil exports were halted
by a strike, with prices spiking, supertankers rerouting and big
profits for producers of alternative supplies.
Nigeria's main oil union has said it will aim to shut down
the country's oil and gas production from Sunday, adding teeth
to a national strike to protest against a more than doubling of
domestic gasoline prices.
But executives at oil companies with Nigerian contracts say
the government in Abuja cannot afford to lose its oil revenue,
and most expect a compromise soon to end the strikes.
Nigeria is Africa's biggest oil exporter and its
high-quality "sweet" crudes, typically low in contaminants such
as corrosive sulphur compounds, are exported to all the major
consuming centres including Asia, Europe and the United States.
Even quite a short dispute would force up dramatically
prices for other sweet grades of oil such as crude from the
North Sea or Azerbaijan, and ironically Libya, which is now
recovering after months of disruption during its civil war.
"Any strike would be very bullish for oil, getting more
bullish the longer it dragged on," said an oil trader with a
large U.S. bank.
"It would be Libya all over again," said another crude oil
trader, who buys on behalf of a European oil refiner.
During the Libyan war, premiums of sweet crude rocketed to
record highs versus sour barrels such as Russian Urals as
European and U.S. refiners rushed to replace lost supplies.
The profitability of turning oil into products, known as
refining margins, also slumped badly, crippling refiners such as
Europe's troubled Petroplus.
Fears of disruption to Nigerian exports have helped underpin
global spot oil prices this week, keeping North Sea crude
benchmark Brent above $110 per barrel. Price moves would
be dramatic if production and exports were affected.
Producers of alternative high-quality crude could expect an
immediate rise in income if Nigerian supplies halted, with
premiums rising for North Sea Brent over poorer quality Dubai.
The big losers would be consumers and the Nigerian government.
"A halt to oil exports would be nothing short of
catastrophic for Nigeria," said one senior executive at a U.S.
oil company with Nigerian contracts who declined to be
identified. "We expect a compromise fairly quickly now."
Nigerian workers took to the streets for a fifth day of
strikes on Friday after trade unions broke off talks with
President Goodluck Jonathan.
But union officials said they would suspend the strikes over
the weekend and allow airports to reopen so that their leaders
could travel to the capital, Abuja, for talks.
Executives in foreign oil companies that trade with the
state Nigerian National Petroleum Corp. said they expected those
talks to bear fruit, because the consequences of losing oil
income would be unbearable for Abuja.
Nigeria is a key swing producer, selling more than 2 million
barrels per day (bpd) of crude oil and other light hydrocarbons
worth an estimated $250 million a day.
Crude oil exports account for 80 percent of government
revenue and 95 percent of foreign currency earnings, leaving
Africa's second-largest economy dependent on oil sales.
Nigerian Finance minister Ngozi Okonjo-Iweala has pledged to
trim government spending this year. A serious oil outage would
make it impossible to keep Nigeria's fiscal deficit within 3
percent of GDP this year and would increase public borrowing.
Central Bank Governor Lamido Sanusi said on Thursday the
strikes were costing the economy over $600 million a day and any
oil disruption would make things "very tough".
Many key oilfields are offshore, are staffed by foreign
nationals and have high levels of automation, which would slow
the impact on production of any stoppage. But even offshore
fields need paperwork, and if officials were to strike, those
facilities would be affected, industry sources say.
"It would make sense for the government either to delay the
end of the fuel subsidies or to come up with another
compromise," said Olivier Jakob, an energy analyst at
consultants Petromatrix in Zug, Switzerland.