Russia-Ukraine Crisis Affecting Demand For Nigeria’s Crude, Says NNPCL

The Nigerian National Petroleum Company Limited (NNPCL) has provided insight into how the lingering conflict between Russia and Ukraine has impacted Nigerian crude oil inflows in the international oil market, leading to a dip in demand from the once-dependable Asian market at the onset of hostilities in the Eastern bloc. Maryamu Idris, Executive Director, Crude & Condensate, NNPC Trading Limited, who said this in a panel presentation at the Argus European Crude Conference in London, added that that the substantial price shocks impacting commodity and energy prices globally, the conflict between Russia and Ukraine has triggered a situation where India, a primary destination for Nigerian grades, increased its appetite for discounted Russian barrels to the detriment of some Nigerian volumes. “To illustrate the extent of this shift, Nigeria’s crude exports to India dwindled from approximately 250,000 barrels per day (bpd) in the six months preceding the February 2022 invasion of Ukraine to 194,000 in the subsequent six months afterwards. And so far, this year, only around 120,000 bpd of Nigerian crude volumes have made their way to India,” she said. On the other hand, she noted that the Nigerian crude flow to Europe has increased in a bid to fill supply gaps left by the ban on Russian crude, pointing out that six months before the war, 678,000 bpd of Nigerian crude grades went to Europe, compared to 710,000 bpd six months later and 730,000 bpd so far this year. “This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners. Several Nigerian distillate-rich grades have become a steady preference for many European refiners, given the absence of Russian Urals and diesel. Forcados Blend, Escravos Light, Bonga, and Egina appear to be the most popular, and our latest addition — Nembe Crude – fits well into this basket. This was a strong factor behind our choice of London and the Argus European Crude Conference as the most ideal launch hub for the grade,” Idris also said. On production challenges, Idris remarked that, like many other oil-producing countries, Nigeria had faced production challenges aggravated by the COVID-19 pandemic, including reduced investment in the upstream sector, supply chain disruptions impacting upstream operations, ageing oil fields, and oil theft by unscrupulous elements. These factors, she said, contributed to production declines in the second half of 2022 and early 2023. Idris, however, noted that the challenges are fast becoming a thing of the past with the introduction and implementation of a new framework for the domestic petroleum industry (the PIA of 2021), rejuvenating the business landscape, and re-positioning NNPC Limited to adopt a more commercial approach to the management of the nation’s hydrocarbon resources. According to her, NNPC Limited has secured vital partnerships with notable financial institutions to promote upstream investments to restore and sustainably grow production capacity in the coming years. “NNPC Limited is championing concerted efforts in partnership with host communities and private stakeholders to address the security and environmental challenges in the Niger Delta to further fortify production growth. Suffice to say we have already begun seeing significant progress on the rebound. In September 2023, Nigeria recorded its highest crude oil and condensate output in nearly two years, reaching 1.72 million barrels per day. This, we believe, is just the beginning of our production rebound.” She affirmed that in addition to sustainably growing upstream production volumes, NNPC Limited is also increasing its participation in the downstream sector in line with a ‘wells-to-wheels’ approach, taking the country’s unique hydrocarbon molecules as close as possible to end-users. The vehicle for this, she said, is the restructured NNPC Trading Company, focused on growing NNPC’s presence in the global market for crude, condensate, gas, and petroleum products. The Argus Crude European Crude Conference Panel Session was held with the theme, ‘The Invisible Hand: How Are Shareholders and Asset Managers Meeting the Crude Industry? What Does This Mean for the Future of Crude in Europe?’ Vice President Crude of Argus, James Gooder, moderated the event.

Global Energy Supply: IEA Forecasts 73% Drop In Fossil Fuels’ Share

The International Energy Agency (IEA) has projected that fossil fuels’ share in global energy supply would drop to 73% by 2030 and carbon dioxide emissions peaking by 2025. This is despite the fact that global oil demand would peak this decade at about 102 million barrels per day (mbd) for two more decades. The agency, in its latest ‘World Energy Outlook (WOE) 2023’ report stated that the drop in fossil fuel share in the global energy market had remained at around 80% for decades. According to the IEA’s Stated Policies Scenario (STEPS) data, from 2030, oil consumption will begin a slow decline by decreasing by more than four million barrels per day to 97.4mbd in 2050, the IEA said.  The report further predicted that in 2030, clean technologies would play a “greater role than today” as electric cars on the road worldwide will increase by 10 times, and renewables’ share of the global electricity mix will be near 50%, up by 30% while heat pumps and other electric heating systems will outsell fossil fuel boilers globally, and investment into new offshore wind projects will be three times more than new coal and gas-fired power plants. Commenting on the report’s findings, Global Net-Zero Transformation Advisory Operations Manager, EcoAct, Lindsay Ventress, said: “The World Energy Outlook 2023 underscores the increasingly narrow path toward preserving the goal of 1.5°C warming, yet provides hope that this remains attainable if we promptly embark on transformative climate actions. “The report’s call for an annual twofold increase in energy efficiency improvements underscores its critical role in a sustainable future, but also the current failure of legislators to get to grips with this vital requirement. In light of this, businesses cannot afford to merely wait for government commitments; they must become catalysts for progress,” she added. Even so, the IEA maintained that demand for fossil fuels was set to remain “far too high” to limit the global rise in temperatures to 1.5°C, as per the Paris Agreement. The agency further warned that despite the impressive growth in clean energy, if the policies are not changed, global emissions would remain high to push the temperature limit by around 2.4°C this century. The STEPS also estimates a peak in energy-related carbon dioxide emissions in the mid-2020s. Speaking on the report’s findings, the IEA Executive Director, Fatih Birol, explained: “Taking into account the ongoing strains and volatility in traditional energy markets today, claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.” According to the report, the tense situation in the Middle East “is a reminder of hazards in oil markets a year after Russia cut gas supplies to Europe”. In the STEPS, the share of seaborne crude oil trade from the Middle East to Asia rises from around 40 per cent to 50 per cent by 2050. The WOE highlights the fears in the natural gas markets due to instability and price hikes after Russia cut supplies to Europe while also foreseeing a surge in new liquefied natural gas (LNG) projects from 2025, with the prospect of adding more than 250 billion cubic metres per year new capacity by 2030, representing 45% of the current global LNG supply. While some of the immediate pressures of the global energy crisis have eased due to the current geopolitical situation and the global economic developments, the IEA drew attention to the “unsettled” global energy market, noting that “this underscores, once again, the frailties of the fossil fuel age and the benefits for energy security as well as for emissions of shifting to a more sustainable energy system.” It stated that developing economies had been experiencing the largest increase in demand for energy services as the extreme volatility in energy markets have pushed for an “affordable, reliable, and resilient supply”.