India Wants to Lift More Oil From Nigeria

  • India Wants to Lift More Oil From Nigeria

Indian state-run refiners are pressing for an increase in crude oil allocations from Nigeria as demand from the South Asian country climbs, an official from the Nigerian National Petroleum Corporation has said.

The request comes just before Nigeria’s crude oil term lifting contracts for 2017 are finalised, which will be decided by mid-December.

India as the largest buyer of Nigerian crude has always said it should have a longer-term arrangement with the NNPC to ensure security of supply.

“Three Indian companies said that they were looking for a combined total of 11 million metric tonnes [in 2017] from nine million mt [this year],” the Group Executive Director, Refineries, NNPC, Anibor Kragha, told S&P Global Platts in an interview on the sidelines of the Petrotech conference in New Delhi on Monday.

“Now what they will get is a balance between term contracts and [spot] sales contracts,” he added.

At least seven barrels of crude make one metric tonne.

The Nigerian crude oil term contracts involve the export of around 1.17 million bpd of Nigerian crude, out of the 2.2 million bpd the country can theoretically produce. They are then sold by contract holders to end-users, refiners and other buyers.

But with Nigerian oil output sharply down due to renewed militancy, the term volumes could be much lower for 2017 if output does not rebound.

Nigerian oil output had recovered sharply after it fell to a 30-year low in early summer but renewed attacks on oil infrastructure in the Niger Delta have shut in production of popular export grade Forcados in the past month.

Total oil/condensate production was around 1.9 million bpd, including 300,000 bpd of condensates, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu said last week.

He said output could reach 2.2 million bpd if the militancy issues were resolved by early next year.

Kragha said that negotiations were ongoing and that he was not sure if the deal would materialise but added that once the Nigerian output recovers, it would “increasingly look towards India” as the major buyer of its crude.

“Indian demand is very positive for us. A vibrant Indian economy is good for us,” he said.

The two countries have been working on a Memorandum of Understanding in the past month to enable the participation of Indian companies in Nigeria’s upstream and downstream oil and gas sector.

The deal being negotiated by Nigeria will also have the Indian government make an upfront payment for the purchase of Nigeria’s crude on a long-term basis as well as Indian public sector companies investing in Nigerian refineries.

Kachikwu recently said the country had negotiated a $15bn investment with India, where the Indian government would make an upfront payment to Nigeria for crude oil purchases.

Indian state-owned refiners tend to buy most of their crude on term contracts while their remaining requirements are sought via tenders.

“We just came out of a meeting with key Indian oil companies and they are pushing to get incremental allocations for the term contracts. We explained to them that there needs to be a balance,” said Kragha.

India is a significant buyer of Nigerian crude, which is largely light and sweet, rich in petrol and diesel and low in sulphur, and meets the needs of Indian refiners.

State-owned refiners such as Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited are major regular buyers of Nigerian crude types like Qua Iboe, Bonny Light, Escravos, EA Blend, Erha, Usan and Agbami.

A source from an Indian refiner told Platts that Nigerian crude had become a must for most of its refineries, especially the older ones, which had been designed to run light sweet crudes.

“Despite all the militancy issues, we still buy Nigerian crude, as our refineries need it. We will continue to buy Nigerian crude; but we want them to supply us with more,” he said.

India, which is currently among the world’s fastest growing economies, has seen its petrol and diesel demand climb sharply over the past few years. This has encouraged Indian refineries to buy more Nigerian crudes.

In 2015-2016, India imported nearly 23.7 million mt of Nigerian crude, nearly 12 per cent of India’s overall oil imports, according to official Indian data.

The South Asian country also imports some two million mt/year of liquefied natural gas from Nigeria.

Every month, almost 20-25 per cent of total Nigerian crude exports travel to India, particularly to the IOC, which is the main recipient of Nigerian crude.

Indian refiners such as the IOC, HPCL and BPCL are currently on crude oil term lifting contracts for 2016 with the NNPC.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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