The Nigerian National Petroleum Company (NNPC) Limited last week, announced the introduction of Nembe Crude Oil Grade, into the international crude oil market.
The announcement of the Nembe Crude Oil Blend, produced by Aiteo, the Operator of the NNPC/Aiteo Oil Mining Lease (OML) 29 Joint Venture (JV), was made at the Argus European Crude Conference in London last week Tuesday.
The OML 29, which is an asset located onshore Nigeria, is operated by Aiteo Eastern Exploration & Production Ltd, Africa’s leading indigenous hydrocarbon producer, following a historic acquisition from Shell in 2014.
The introduction of the blend is coming at a time when the lingering conflict between Russia and Ukraine has made many European countries to seek for crude oil products that aligns with their market preference.
In the past twelve months, the oil market has absorbed the impact of Russia’s invasion of Ukraine and the sanctions imposed in response by the United States, the European Union and their allies in Asia.
Russia’s crude and fuel exports have been redirected to South and East Asia, while former markets in Europe have been backfilled with crude and products from the Middle East and Asia.
Since the war, the crude industry has been changing faster than ever before as markets in Europe become more tied in with global crude oil trade. But with the introduction of Nembe grade, Nigeria’s crude oil grade is on its way to becoming a steady preference for many European refiners.
From all indication, the move by the NNPC is a significant development for Nigeria, as it will help to diversify the country’s crude oil exports and reduce its reliance on a few key grades.
Before the export of Nembe Crude, the crude oil grades peculiar to Nigeria are Bonny Light which is a light, sweet crude oil with a low sulfur content prized for its high quality and versatility; Qua Iboe which which is similar to Bonny Light, but it is slightly heavier and has a higher API gravity.
There is also Forcados, which is a slightly higher sulfur content than Bonny Light or Qua Iboe but more viscous than the Bonny Light and Qua Iboe.
Similarly, Nigeria’s crude oil grades include Brass River and Escravos which have higher sulfur content than the other Nigerian grades and are also more viscous.
But the unique selling point of the Nembe Crude Oil grade with an API gravity is that it has a low sulphur content and low carbon footprint due to flare gas elimination, fitting perfectly into the required spec of major buyers in Europe.
Already, about 950,000 barrels each of the Nembe Crude Oil grade have since been exported to France and the Netherlands.
With its attractive array of API and low sulphur content, the Nembe Crude Oil grade commands a premium to the global Brent benchmark.
This remarkable achievement signals the commencement of activities at Nigeria’s newest crude oil terminal, the Nembe Crude Oil Export Terminal (NCOET), which was licensed in line with the extant laws and Crude Oil Terminal establishment regulations.
The terminal was conceived as a Floating Storage and Offloading Vessel (FSO) with a storage capacity of two Million Barrels and the ability to offload crude oil to any export tanker from AFRAMAX to Very Large Crude Carriers (VLCC).
Given the absence of Russian Urals and diesel, product such as Forcados Blend, Escravos Light, Bonga, and Egina appear to be the most popular but Nigeria’s latest addition — Nembe Crude – has also fit well into this basket.
This was a strong factor behind the NNPC Limited choice of London and the Argus European Crude Conference as the most ideal launch hub for the grade.
Before now, the lingering conflict between Russia and Ukraine has impacted Nigerian crude oil inflows in the international oil market, leading to a dip in demand from the once-dependable Asian market at the onset of hostilities in the Eastern bloc.
In addition to the substantial price shocks impacting commodity and energy prices globally, the conflict between Russia and Ukraine has triggered a situation where India, a primary destination for Nigerian grades, increased its appetite for discounted Russian barrels to the detriment of some Nigerian volumes.
To illustrate the extent of this shift, Nigeria’s crude exports to India had dwindled from approximately 250,000 barrels per day (bpd) in the six months preceding the February 2022 invasion of Ukraine to 194,000 in the subsequent six months afterwards.
This year, only around 120,000 bpd of Nigerian crude volumes have made their way to India.
It is instructive to state that the Nigerian crude flow to Europe has increased in a bid to fill supply gaps left by the ban on Russian crude, because six months before the war, 678,000 bpd of Nigerian crude grades went to Europe, compared to 710,000 bpd six months later and 730,000 bpd so far this year.
This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners.
Like many other oil-producing countries, Nigeria had faced production challenges aggravated by the COVID-19 pandemic, including reduced investment in the upstream sector, supply chain disruptions impacting upstream operations, ageing oil fields, and oil theft by unscrupulous elements.
But with the reforms being implemented by the Group Chief Executive Officer of the NNPC Limited, Mele Kyari, the challenges are fast becoming a thing of the past.
Kyari had led the NNPC Limited to implement a new framework for the domestic petroleum industry (the PIA of 2021), rejuvenated the business landscape, and re-positioned NNPC Limited to adopt a more commercial approach to the management of the nation’s hydrocarbon resources.
Under the leadership of Kyari, NNPC Limited has secured vital partnerships with notable financial institutions to promote upstream investments to restore and sustainably grow production capacity in the coming years.
Also, through concerted efforts and partnership with host communities and private stakeholders, the NNPC has been able to address the security and environmental challenges in the Niger Delta to further fortify production growth.
The partnership, which started two years ago to end the menace of crude oil theft in the country, saw Kyari leading a delegation from the oil and gas industry to the Niger Delta to seek support for the protection of oil and gas installations in the country.
Before the commencement of the coalition in 2021, crude oil theft cost Nigeria around 470,000 barrels of crude estimated at $700m daily as of that time.
A report by the Nigerian Extractive International Transparency Initiative had estimated that Nigeria lost 619.7 million barrels of crude oil valued at N25trn between 2009 and 2020.
Suffice it to say that since the coalition, Nigerians have started seeing results as crude oil theft and pipeline vandalism have reduced drastically.
This has made the Nigerian oil and gas industry to achieve its highest crude oil and condensate output in nearly 18 months, with a production of 1.72 million barrels of crude and condensate in the month of September this year.
This improvement is the result of months of collaboration with operators to co-create unique solutions to peculiar challenges, mainly evacuation issues faced by individual operators, stakeholder management, political will, and support from government institutions.
The increase in crude oil production is also directly attributable to the reopening of operations along corridors with a history of security challenges, the restart of production from facilities that have been shut down for extended periods due to evacuation challenges, the completion of Turn Around Maintenance (TAM) of some assets, completion, and hook-up of infill wells, and critical well intervention projects
With the acceptance of the Nembe crude oil grade in the European market, it is expected that Nigeria will earn more revenue from oil, thereby boosting the NNPC Limited’s ability to continue to guarantee energy security for the nation.
Onuba, a Chartered Accountant, wrote in from Abuja.