By Jeph Ajobaju,
Chief Copy Editor
Nigeria’s two top grade crudes, Bonny Light and Qua Iboe, sold for as high as $2 per barrel (pb) above dated Brent this week, their strongest since March 2018.
Traders attributed it to cheaper freight rates and shorter supply of competing grades such as Libyan crude, according Reuters.
Traders say exports of Qua Iboe may drop to 215,000 barrels per day (bpd) in March, from 238,000 bpd in February.
There are still about 15 left for sale from the February Nigerian programmes, but most major grades were sold out earlier this month.
America may also buy more oil from Nigeria if Washington carries out plans to reduce Venezuelan imports because of its opposition to President Nicolas Maduro, whose election it considers illegitimate.
The United States is Nigeria’s second biggest oil buyer, after India.
- S. refiners have few supply alternatives if the Donald Trump administration were to cut off crude imports from that country.
Supplies of the heavy oils preferred by Gulf Coast refiners have been harder to secure in recent months because of cutbacks and production curbs in Western Canada, Mexico, and Venezuela.
Venezuela exported 500,013 bpd to the U.S. last year, down from 591,422 bpd in 2017.
Back in Nigeria, Reuters also reports that Forte Oil plans to enter into talks to sell its power unit to its major investor, Femi Otedola, after it failed to secure a deal via a public tender.
Forte plans to use proceeds from the sale to expand its fuel retailing unit, its main focus.
It also imports fuel and car lubricants, which it resells at petrol stations.
The company will seek shareholder approval in a vote on February 7 to start talks with Otedola.
Amperion Power Distribution Company Limited, Forte’s power subsidiary, paid $132 million to acquire a 414 megawatt (mw) power plant in 2012 under Abuja’s privatisation scheme to tackle perennial blackouts.
Nigeria’s retail fuel sector operates under a tightly regulated fixed margins, and so requires a lot of capital to expand. The sector could be deregulated given its impact on the naira and import bill.
Last year, Forte sold its power generating unit, upstream services business and downstream venture in Ghana to focus on its fuel distribution operation in Nigeria.
The company said on January 17 that Otedola is keen on bidding for the power unit and his proposal would be reviewed by management and an independent adviser.
A public tender to sell the power asset received “unexpectedly low interest”, Forte said, adding that pricing proposals it received did not meet its expectation.
Shares in Forte rose 2.55 per cent on Thursday to 30.15 naira, valuing the company at N39.3 ($128 million).
Otedola has agreed to sell his 75 per cent interest in Forte Oil’s downstream business, with the deal expected to close in the first quarter.
Supply of refined crude is expected to be raised by Aliko Dangote, Africa’s richest man, who is building an oil refinery in Lekki, Lagos with a capacity of 650,000 bpd, expected to cost $12 billion.
It will be the biggest refinery of its type in the world.
Dangote plans to produce enough petrol and kerosene to meet the demand of all of Nigeria’s 180 million population and have some left over for export.
A separate fertiliser plant will produce 3m tonnes a year of urea, enough to meet the current needs of farmers nationwide, and a petrochemicals factory will make a combined 1.3m t/y of polyethylene and polypropylene.
The refinery will absorb 30 per cent of Nigeria’s daily oil production and shift the curve of its import-export.
When the refinery enters production in the first quarter of 2020, it will solve many of the structural problems that have plagued Nigeria since it discovered huge quantities of oil in 1958.
Nigeria exports crude and imports refined products that are subsidised by the state, and this enables a plethora of dealers and middlemen to make easy fortunes out of the arbitrage opportunities.
Dangote said his refinery will save Nigeria billions of dollars in foreign exchange and remove the pickings that have benefited generations of entrepreneurs diverted from production to speculation.
