Khaleej Times: West African Offshore Drilling and the Oil Price Crash

The 50 per cent fall in Brent crude price and the surge in US shale oil production since 2008 has proved disastrous for West Africa’s major oil producers Nigeria and Angola. Nigerian benchmark Bonny Light crude exports to the US have fallen a shocking 90 per cent. This has forced Nigeria to divert crude intended for sale into the US to the international spot market or the Southeast Asian wet barrel market, a major factor is the global oil glut and oil price crash since June 2014.

It is ironic that African economists once estimated that Nigeria and Angola would account for 25 per cent of US crude imports by 2020. The shale oil revolution, whose centre is West Texas and North Dakota, make this bullish forecast, an impossible scenario. The shale oil revolution has enabled the US to add four million barrels a day and Canada an extra one million barrel a day to global capacity. US imports of Nigerian, Angolan and Equatorial Guinea oil could fall to zero in the next decade if Brent crude trades in the $50-$60 range. This makes the economics of many upstream oil and gas projects in West Africa unfeasible, even if smaller US shale oil producers cut output or even go out of business.

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