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Saudi Arabia oil sales to U.S. affected by Sale boom…as it moves to check Nigeria in Asia

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10 years ago

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LAGOS-The U.S. imported 878,000 barrels of Saudi crude a day in the first four weeks of August, the least since 2009 with the Middle Eastern oil giant producer now looking more and more towards Asia form where it can easily squeeze out Nigeria’s growing foothold.
Saudi Arabia’s Arab Light crude for sale in the U.S. averaged 48 cents a barrel less than Light Louisiana Sweet, a Gulf Coast benchmark, in August, the narrowest discount in data compiled by Bloomberg back to 1991.
After years of keeping the price of crude sold to the U.S. low enough to maintain market share, Saudi Arabia is losing ground as the shale boom leaves U.S. refiners with ample supplies of inexpensive domestic oil.
Shale drilling has boosted U.S. oil output to the highest level since 1986. As refineries turn to lower-priced domestic oil to make fuel at a record pace, the Saudis and other foreign suppliers are left with dwindling slices of the market. In June, imports from Saudi Arabia accounted for the smallest share of crude processed at U.S. refineries since February 2010.
“The Saudis are not going to sell crude at a disadvantage to themselves — they’re not about buying market share anymore,” Mike Wittner, Societe Generale (GLE)’s head of oil market research in New York, said by telephone Aug. 28. “Those days are long gone. They’ll price crude to be competitive with the competing sour grades in every market, and if that means their flows to the U.S. are down, so be it.”
Saudi Oil Minister Ali al-Naimi told reporters in Vienna in December that he expected Saudi shipments to the U.S. to stabilize at an average of 1.4 million to 1.5 million barrels a day this year. Saudi Arabian officials didn’t return at least nine calls between Aug. 28 and yesterday seeking comment on the exports.
Saudi Arabian Oil Co. shares ownership with Royal Dutch Shell Plc (RDSA) of three refineries on the U.S. Gulf Coast, including a 600,000-barrel-a-day plant in Port Arthur, Texas, the largest in the U.S. The refineries, which have combined capacity of 1.07 million barrels a day, imported 331,000 barrels a day from Saudi Arabia in June.
Until recent months, the kingdom maintained a steady flow to the U.S. around 1.3 million barrels a day even as total U.S. imports fell by 34 percent from a peak in June 2005. Other countries didn’t fare as well. Shipments are 59 percent below their peak from Mexico, 56 percent from Venezuela and 93 percent from Nigeria.
Imports are being pushed out by domestic production that’s risen 65 percent in the past five years, spurred by horizontal drilling and hydraulic fracturing in underground layers of shale rock. Growing pipeline deliveries of heavy crude from Canada also displaced waterborne cargoes from abroad.
The price of West Texas Intermediate crude averaged $96.08 a barrel in August, compared with $106.54 the same month the year before. It settled at $94.45 in New York today.
“The Saudis might fully intend to stay in the U.S. market, they might fully intend to have a million-plus barrels, it’s just the market supply-and-demand levels probably won’t allow that,” said John Auers, executive vice president at energy consulting firm Turner Mason & Co.
Saudi Aramco, as the state oil company is known, bases prices for the different destinations on regional indexes, adjusting premiums and discounts to be competitive against oil from other countries.
In the U.S., Aramco’s adjustments kept the average price of Arab Light more than $2 a barrel below Light Louisiana Sweet every month until July. The discount was $1.27 at 4:02 p.m. today.
Aramco was offering oil to the U.S. at a significant discount to prices in other regions. Arab Light to the U.S. was $5.64 a barrel less than to Asia in 2013, falling to a $22.64 discount in November. Saudi Arabia lost $2.6 billion by selling oil to the U.S. instead of Asia in 2013, Auers said.
Shifting Sales
“In some ways, it’s inevitable that Saudi Arabia realizes there are more attractive markets, and they’ll rotate away, supply their U.S. refineries with domestic grades and sell their crude at a premium to Asia,” Francisco Blanch, head of commodities research at Bank of America Corp. in New York, said by phone Aug. 29. “As the U.S. becomes a more balanced crude force in global markets, it’ll move toward lesser imports and become decreasingly attractive to foreign crude sellers.”
Saudi exports to the U.S. averaged 1.32 million barrels a day in 2013, the second-most of any country behind Canada. They reached 1.58 million in April, before dropping by almost half to average 878,000 over the first four weeks of August, according to U.S. Customs data compiled by Bloomberg.
The price changes and declining imports might just be a blip, Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy in New York, said by telephone Aug. 26. Saudi Arabia uses more crude domestically during summer months to generate power and meet increasing demand for air conditioning. Temperatures have been higher than normal.
“I’m not sure how much I’d read into a couple of weeks or even a couple of months of data,” Bordoff said. “Saudi imports have come down, but they’re still higher than what we saw in 2009.”
Saudi Aramco yesterday lowered for a second straight month its adjustments versus the regional benchmark for crude sold to the U.S. The discount for Arab Light sales in the U.S. in October was widened by 40 cents a barrel from September. Aramco reduced the Arab Light premium for Asia by $1.70 a barrel.
“The Saudis continue to want to maintain a diversified market for their crude, and they continue to want a significant presence in the U.S. market.” Bordoff said.
Shipments to the U.S. have fallen even as Saudi exports to the rest of the world have held steady. U.S. imports from Saudi Arabia fell by 562,000 barrels a day from April to June, more than the 506,000-barrel-a-day decline of total Saudi exports, according to the U.S. Energy Information Administration and Joint Oil Data Initiative, a database supervised by Riyadh-based International Energy Forum.
Saudi sales to Asia will become more important moving forward as demand for liquid fuels in the region is expected to grow 44 percent through 2035, while North American demand shrinks, according to BP Plc. In September China surpassed the U.S. as the world’s largest importer of crude oil and refined products.
The redirecting of supplies to other markets and the U.S.’s shrinking dependence on foreign oil will inevitably change American interest in international conflicts, Blanch said.
“It is perhaps the biggest question: Is the reduced commercial relationship between the U.S. and Saudi going to lead to lesser involvement of the U.S. in the Middle East?‘‘ said
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Oil

NNPC Targets 60% Methane Emission Reduction By 2031

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3 weeks ago

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December 6, 2024

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The Nigerian National Petroleum Company Limited (NNPC) has unveiled a bold strategy to reduce methane emissions in the oil and gas sector by 60% by 2031, with an ultimate goal of achieving net-zero emissions by 2060.

This announcement reinforces Nigeria’s leadership role under the Global Methane Pledge initiative and its commitment to tackling climate change.

The Group Chief Executive Officer of NNPC, Mele Kyari, disclosed these plans during a meeting on Thursday with Robert Leahman, the U.S. State Department’s Global Methane Program Manager, and a delegation from Deloitte.

READ MORE: Atiku Gloats Over AUN’s Achievements Ahead Of 20th Anniversary

The discussions, held at the NNPC Towers in Abuja, focused on collaborative efforts to reduce methane emissions through innovative and sustainable practices.

“Reducing methane emissions is not just an environmental necessity but also a strategic imperative for Nigeria’s energy transition. We are leveraging partnerships to adopt global best practices and innovative solutions,” Kyari stated.

Key among these efforts is a pilot project in the Niger Delta, aimed at establishing emissions baselines, mitigating methane leaks, and promoting sustainable operations across Nigeria’s energy sector.

The project, a partnership between NNPC, Deloitte, and the U.S. Bureau of Energy Resources, will utilize data-driven methodologies to pinpoint and address methane hotspots.

Robert Leahman commended Nigeria’s proactive stance, describing it as a benchmark for other nations on the continent.

“Nigeria’s leadership under the Global Methane Pledge sets a standard for the continent. These initiatives will not only help reduce emissions but also drive sustainable development in the energy sector,” he said.

Kyari highlighted the broader benefits of addressing methane emissions, noting its significance for both environmental protection and economic efficiency.

“This collaboration is a game-changer. By addressing methane leaks, we’re reducing waste, saving costs, and protecting the environment. It’s a win-win for our economy and the planet,” he added.

 

 

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Oil

FG Introduces New Incentives To Revitalize Nigeria’s Oil & Gas Industry

Published

3 months ago

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October 2, 2024

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In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.

The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.

The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.

Read Also: Atiku Calls For Rotational Presidency Across Nigeria’s Geopolitical Zones

These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.

The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.

This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.

These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.

The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.

 

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Business

Tinubu set to approve ExxonMobil-Seplat oil deal, expands CNG bus initiative

Published

3 months ago

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October 2, 2024

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By Yemie Adeoye

NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.

The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.

“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”

The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.

“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.

Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.

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