Nigeria+Petroleum

=China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation (CNPC), and China Petroleum & Chemical Corporation (Sinopec) Are Likely To Increase Imports Of Nigerian Oil And Investment In Oil Blocks=

Executive Summary:
‍It is likely that China will increase its imports of petroleum from Nigeria in the next five years with CNOOC, Sinopec, and CNPC being the main Chinese companies. Similarly, Nigeria is likely to look for China's aid in completing their goals and challenges for their national oil and gas strategy. CNOOC currently owns a 45 percent interest in the OML 130 block in Nigeria, which is a deep water project and comprises four oilfields, namely, Akpo, Egina, Egina South and Preowei. While CNPC owns the tender of four blocks, namely OPL298, OPL471, OPL721 and OPL732. A powerful country like China could give ‍ Nigeria the capabilities it does not have on its own to fulfill the oil and gas strategy. Bilateral trade between China and Nigeria has significantly increased in the past five years, and China has increased its involvement with Nigeria's financing and involvement of infrastructure projects. Currently, Nigerian crude oil is being stolen on an industrial scale. So far Nigeria's trade partners and diplomatic partners have not taken action. Therefore, China could be the first to help Nigeria face this challenge, and in the process increase their already strong ties. Nigeria is ranked tenth in crude oil production and eleventh in proved reserves. However, its ranking is 39 in refinery capacity. China is the world’s second biggest crude oil consumer, and is looking to diversify its sources making Nigeria a prime target.

Discussion:[[image:Capture2.PNG width="469" height="328" align="right" caption="US Imports from Nigeria Decreasing. (http://tinyurl.com/okz4ohp)"]]
According to US Energy Information Administration in a 1 Jan. 2013 report, Nigeria holds 43 percent of Sub-Saharan Africa's proved oil reserves. It is ranked eleventh in the world for proved oil reserves, and tenth in world crude oil production, but only 39th in refinery capacity. In the past five years, US oil imports from Nigeria have been decreasing, which allows for Nigeria to export more to other countries. Henry Curra, head of research at ship broker ACM Shipping in Singapore, states, "Although with the return of Libyan crude exports and Iraq coming out of maintenance, Nigeria is probably already looking for Asian buyers to replace lost European demand for West Africa barrels". Also,Peter Sand, chief shipping analyst with trade group BIMCO, said China would be shopping around. Recently, Ngozi Okonjo-Iweala, Nigeria's Finance Minister, noted that the gap in demand for the nation’s sweet crude created by the US would be filled by China and India.

China is the world's second biggest crude oil consumer, and is looking to diversify its sources. Nigeria is Africa's largest oil exporter, and the world's tenth[|;] making Nigeria a target for China. According to "Oil and Gas Journal", Nigeria has an estimated 37.3 billion barrels of proven crude oil reserves as of 2011[|.] Agence-France Presse (AFP) reports that China's demand for oil produced in Nigeria is projected to rise tenfold to 200,000 barrels a day by 2015[|.] Reuters reports that shifting trade patterns and China's growing love affair with the car will help fuel an increase in shipping costs for very large oil tankers, and help ship owners return to profitability. "Very big structural changes are coming with more long-haul trades," said Nicolai Hansteen, senior shipping analyst at Pareto Securities. He then explained that this will see more oil shipped on very large crude carriers from West Africa and the Caribbean to China and the rest of Asia.

Nigeria's oil and gas strategy in the next five years points out that its main goals and challenges for national oil are: enhance exploration and exploitation of petroleum resources, create a competitive business environment for the exploitation of oil and gas, increase the national objective to 40 billion barrels of crude oil reserves in the next seven years, and to combat crude oil and petroleum product theft. Oil industry officials and community workers say this massive theft of Nigeria's oil involves crooked politicians, security forces, oil industry personnel and oil traders. International companies have accelerated a retreat from Sub-Saharan Africa’s oil industry amid surging theft of crude oil and political uncertainty.Royal Dutch Shell is selling off four of its onshore Nigerian oil blocks because of the constant theft of large volumes of oil from its pipelines, officials said. On 10 Oct., Shell closed its Trans-Niger pipeline, capable of pumping 150,000 barrels per day to the giant refinery at Bonney, because it had been holed so many times by thieves. Nigerian crude oil is being stolen on an industrial scale, losing an estimate of five percent of the total output per day of crude oil. However, Nigeria's trade partners and diplomatic partners have not taken action to aid Nigeria combat the theft. An analysis of the oil theft urged Nigeria to seek assistance from its partners. Nigeria claims to be broke and stating that they are not selling enough crude to meet budgetary provisions, salaries are getting paid late, the government is failing to meet some of its obligations, and domestic debt is rising rapidly.

Nigerian President Goodluck Jonathan asserted, “Nigeria was currently strengthening investment and economic ties with China because of the exponential increase in the bilateral trade volume between the two countries within the last few years as well as China’s involvement in the financing and construction of key infrastructural projects in the country"[|.] Trade between the two countries which was below USD 2 billion in 2002, has exceeded USD 13 billion annually. About a third of all China’s West African investments are in Nigeria, which has become China’s number one trading partner in the sub region. As previously stated, CNOOC owns a 45 percent interest in the OML 130 block in Nigeria, which is a deep water project and comprises four oilfields, namely, Akpo, Egina, Egina South and Preowei. CNOOC paid USD 2.3 billion for the stake. While CNPC owns the tender of four blocks, OPL298, OPL471, OPL721 and OPL732. Sinopec, in mid-2009 bought Addax of Canada, which has substantial Nigerian oil assets, for USD 7.2 billion. Addax, now a subsidiary of Sinopec, has the producing assets of 11 field complexes with around 60 production wells in concession OML123, 2 fields with 20 producing wells in concession OML 124 and 2 fields with 14 production wells in concession OML126. Ongoing progress with Field Development Planning is expected to result in a significant increase in the production, from the present combined 75.000 barrels per day from OML123, OML124 and OML126 to over 85.000 barrels per day at the end of 2012. Cornelis Zegelaar, managing director of Addax, said "Nigeria is the most important for us and the biggest producer". He also told AFP that Addax was now producing more than 90,000 barrels per day from four licenses in Nigeria, mainly in the shallower offshore areas. Total announced in November the sale of its 20-percent stake in an offshore OML 138 bloc to Sinopec for USD 2.5 billion. The OML 138 bloc, which includes the Usan oil well in production since last year, is co-owned by US groups Chevron and ExxonMobil and Canadian company Nexen.

** Analytic Confidence: **
Analytic confidence is medium. Source reliability ranges from medium to high. There is no conflict between sources. The analyst had low expertise on the subject, did not use a structured analytic method worked alone and collaborated with a team. The subject is moderately complex and the deadline was moderately difficult to meet.
 * Analyst:** RoseAnna Wright