April 28, 2008 / 5:24 PM / 11 years ago

ANALYSIS-Nigeria may lose top Africa oil exporter status

By Ikuko Kao

LONDON, April 28 (Reuters) - Nigeria, which has been forced to shut in more than half of its oil output following rebel attacks and a workers’ strike, could lose its position as Africa’s top oil exporter, analysts and trading sources said.

Nigeria’s lifeblood industry, besieged by insurgents fighting to gain control of oil pumped in their backyard and criminals who break into pipelines and steal crude for illegal export, is losing more than half its output at a time when oil prices are at their peak.

The cumulative oil production outage for Africa’s most populous nation now amounts to more than 1.3 million barrels per day from its most recent output of about 2 million bpd.

The loss includes the most recent shut-ins from Exxon Mobil (XOM.N) and Royal Dutch Shell (RDSa.L), the top two foreign oil producers in Nigeria.

Exxon has lost 770,000 barrels of its crude oil production, or almost all of its Nigerian output due to a workers’ strike over a labour dispute.

Shell said last week it had shut 169,000 bpd of its production following repeated attacks by rebels in the restive Delta region, where most of Nigeria’s oil is produced. On Monday the rebels claimed Shell’s shut-ins amounted to 350,000 bpd, but Shell in Nigeria was not immediately available to react to that figure.

Analysts said Nigeria risked losing its top oil producer status in Africa to Angola.

"It is one scenario, definitely," said David Fyfe, the principal analyst of global oil supply with the International Energy Agency, the adviser to industrialised nations on energy.

"Problems continue to beset substantial volumes of Niger Delta production. With a temporary hiatus in new deep water development, further problems in the Delta could indeed hamper total Nigerian exports."

Nigeria’s May exports are likely to fall below 1.9 million bpd after some loading delays into June, while the original schedule had shown exports of 1.98 million bpd, traders said.

Angola’s shipping programme shows its exports are expected to average slightly above 1.9 million bpd for May and June.

The complete set of Nigeria’s June export programmes are not yet available.



SWEET VERSUS SOUR CRUDE

Nigeria and Angola are sub-Saharan Africa’s only members of the Organization of the Petroleum Exporting Countries (OPEC). Nigeria’s OPEC production target is 2.16 million bpd.

It produces expensive high quality crude oil, light in quality and low in sulphur content, and is easy to be processed into value-added products such as gasoline and diesel.

Angola’s OPEC output target is 1.9 million bpd. It pumps heavy crude with higher sulphur content and cheaper price tags.

Mike Wittner, the global head of Societe Generale’s oil research, pointed out Nigeria and Angola now have different types of customer bases with different refinery configurations, and high quality crude should still attract demand.

However buyers may already have started looking at alternatives to purchases from Nigeria, traders said.

Every month buyers of Nigerian crude face delays to shipments, frequent revisions of loading schedules and occasional disruption of exports — affecting refineries’ business plans, traders said.

"Nigeria is a mess at the moment. Lifters are still awaiting advice from the operators of a number of grades for revised dates for their cargoes," a crude oil trader, who asked not to be named, said.

"It should mean better interest for the more stable Angolan production for those who can run the lighter Angolan grades."

The trader said refiners with light crude oil slates may turn to the Mediterranean market.

Although Nigeria issues official selling prices for more than 10 crude oil and condensate grades, some grades have been missing from the market for several years due mainly to security concerns.

"Supplies of that very high quality, middle distillate-rich feedstock are actually missed. Their return often promised but not near yet," Jan Stuart, economist with UBS, said in a research note.

"Nigeria’s output remains hobbled by lawlessness in the Nigeria delta to a greater extent than we expected." (Addtional reporting by Daniel Flynn; editing by James Jukwey and Randy Fabi)



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