Positive Oil Supply Developments in West Africa

May 14th, 2012 0 Comments

Positive Oil Supply Developments in West Africa

With the recent focus on supply disruptions and the potential for continuing unrest in North Africa and the Middle East, several positive developments in oil supply from West Africa may have escaped attention. Arresting earlier declines, the region’s top two producers, Nigeria and Angola, have each managed relatively robust production and export performances, helping offset shortfalls in supply from Libya, Syria, and Yemen. Both countries offer the promise of further, significant capacity additions in the short- to medium-term, although, in Nigeria, some major challenges remain. The region also includes a number of emerging suppliers, including Ghana, which has experienced a rapid ramp up in output from less than 10,000 barrels per day (bbl/d) last year to over 90,000 bbl/d by mid-2011.

The importance of West African crude streams to the world oil market reflects their quality as well as their volume. Nigeria’s light, sweet (low-sulfur) crude grades, with their high gasoline yields, came in particularly high demand when civil war broke out in Libya earlier this year, as they offered relatively close substitutes for Libyan oil. Ordinarily, according to Lloyd’s List Intelligence APEX database, the United States takes the lion’s share of Nigeria’s crude exports (43 percent in 2010), followed by India (14 percent) and Brazil (8 percent), while China attracts the bulk of Angolan exports. In 2010, the U.S. accounted for only 23 percent of Angolan exports, far behind China (45 percent), with India and Taiwan together accounting for another 15 percent.

Collectively, West Africa remains an important source of U.S. oil supply, accounting for roughly 14 percent of total U.S. oil imports last year, even as increased volumes were being shipped to Asian markets. West Africa was the third largest supply region for U.S. imports in 2010, trailing behind the Persian Gulf and well behind the Americas, including Canada, which is by far our largest source of imports. Nigeria and Angola, the dominant West African suppliers which are both OPEC members, together shipped a combined 1.4 million bbl/d of oil to the United States in 2010, placing them among the top ten sources of U.S. oil imports. Non-OPEC West African producers accounted for another 230,000 bbl/d of U.S. oil imports.

Oil Supply Developments