Opportunity Nigeria as top oil buyers get selective about US crude

Asian refiners are getting finickier about the quality of its US crude purchases as contrasts in cargoes purchased have led to fluctuations in the type of fuels they produce. The shale boom gave rise to buyers from China to India turning to US as against traditional suppliers from Africa and Middle East.

Refiners are shifting their focus to crudes with consistent characteristics. Over time, it has been proven that Shale oil varieties such as Eagle Ford are a blend of shale oils pumped from wells in south Texas spanning an area about 65 times the size of New York City which gives rise to crude with inconsistent quality. While crude from the Middle East, Africa come from a small cluster of fields with more stable chemical specifications.

“The flow of US oil to Asia is here to stay, but Asian importers are learning that not all grades are equally desirable,” says Tushar Tarun Bansal, a consultant from McKinsey Energy Insights. “Buyers are wary of grades such as Eagle Ford and cannot take much more of it.”

Three Asian refiners that purchased and refined Eagle Ford shale oil do not plan to buy significant volumes of the grade due to concerns over the consistency of its quality, according to a Bloomberg survey of officials at the companies.

Companies typically select a mix of different crudes to process, choosing grades based on chemical characteristics that will yield higher volumes of the fuels that are most in demand. When the oil specifications are inconsistent, plants may pump out less of the products that the refiners want and more of what they do not require at the time.

Opportunity Nigeria

Nigerian crudes are pumped from a small cluster of fields with more stable chemical specifications which the country’s crude marketers should exploit as the market gets more competitive and crude buyers become more selective.

“West African or Middle Eastern crudes originate from one single large and stable reservoir but shale crudes are often extracted from multiple layers and can originate from different parts of a basin which have varying geological characteristics,” said Virendra Chauhan, an analyst at industry consultant Energy Aspects Ltd.

FRANK UZUEGBUNAM