However, fortunes have fluctuated both for imports and exports, impacting on the tanker market, Gibson said in a report last week.
The country has suffered badly from the drop in oil prices, which continues to put a strain on government finances. There is some hope on the horizon, as the level of insurgent activity has fallen, force majeure has been lifted on the 250,000 barrels per day Forcados stream and just recently, Shell lifted force majeure on Bonny Light.
Higher production is beneficial for crude tankers in the short term, which are being put under pressure by OPEC cuts and a global oversupply.
In the past, Nigeria has indicated that it was willing to OPEC’s collective efforts, once its production returns to ‘normal levels,’ which could be fast approaching. But as production is moving in the right direction, instability is still an issue and the risk of further insurgent activity remains, Gibson said.
Higher crude production may also have a positive impact on product imports, benefiting clean tankers. Increased export volumes offer support for crude for product swaps - where international refiners/traders exchange clean products for crude cargoes. Higher production also provides further income to pay for fuel imports outside of the swap agreements.
As with all developing nations, the status quo does not remain for long. While most forecasters see little growth in Nigerian crude production, the picture is different in the refining sector. Some 12 months ago, Gibson highlighted a new greenfield refinery under construction in Nigeria. Despite the usual hurdles in that country, work is progressing at the 650,000 barrel per day Lekki refinery in Lagos.
News emerged recently that DuPont had agreed to provide a 27,000 barrels per day alkylation unit to help the production of high quality clean fuels. The company said that it anticipated a start up in the fourth quarter of 2019. This may be optimistic, but it does appear that this refinery will be finished, as the IEA’s medium term report lists it as starting production in 2022, Gibson said.
Here the challenge is not simply building a refinery, but running the plant to near capacity, which is something other Nigerian refineries have failed to come close to, thus far.
This development is clearly bearish for Nigerian crude oil exports in the longer term, given limited prospects for production growth and it would also indicate a reduction in products imports once the refinery comes on stream.
However, when taking into account regional demand forecasts, additional refinery capacity still falls short. This will help ensure that West Africa remains a demand outlet for refined products from Europe and beyond, even if growth could remain limited.
In addition, the new refinery is earmarked for product exports, thus creating more trading opportunities across the region, Gibson concluded.