ExxonMobil Seeks Alternative Route To Export Qua Iboe Grade

As repairs continue on its main export pipeline damaged last month, Mobil Producing Nigeria Unlimited, a subsidiary of ExxonMobil, is seeking to use an alternative pipeline to transport its Qua Iboe crude grade from the company’s producing fields to its Qua Iboe export terminal in Akwa Ibom State.

ExxonMobil’s subsea pipeline was purportedly breached by a militia group last month, forcing the company to declare force majeure on the export of the Qua Iboe crude grade, Nigeria’s largest export stream.

The Niger Delta Avengers had claimed responsibility for the attack on the company’s 48-inch pipeline, which the company denied, calling it a “system anomaly”.
Reuters quoted company sources as saying that the company later found substantial damage that would take at least one to two months to repair.

Whatever the cause of the damage, port sources and oil traders said repairs would take months, spurring the decision to try to export via a second, smaller pipeline that also feeds the platform.
“Exxon is preparing the alternate export line,” one source informed Reuters, adding that if it is successful, some exports could emerge within two weeks.

Two sources added that Exxon, and the Qua Iboe terminal itself, were not sharing details on the repair progress or export plans for fear of provoking militant attacks on oil infrastructure.
A spokesman for Mobil Producing Nigeria Unlimited declined to comment on the plan to use an alternative pipeline, saying: “We’re continuing to make progress, but we would not speculate on a timeline for repairs.”

Nigeria’s oil production has been impacted by militancy since the beginning of the year, with the Nigerian National Petroleum Corporation (NNPC) saying in its latest monthly report that pipeline attacks had taken out some 700,000 barrels per day from the country’s production, which was above 2 million bpd.

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Buyers Shun Nigeria’s January Crude Cargo

Asian and European demand for Nigeria and other West African cargoes has been slow so far, exacerbated by high freight rates and the availability of cheaper sweet crudes in both regions. Activity on Nigeria was slow especially for key grades such as Qua Iboe, Bonny Light, Bonga and Forcados.

Some niche grades like Akpo, Usan and Agbami have sold decently but the whole Nigerian sweet crude complex was being dragged down by the weak demand. “The market is in disaster mode,” said a trader. “There is just no demand for these Nigerian grades at the moment. There is too much oil to choose from. Even the Azeri Light values are coming crashing down.”

Nigeria’s flagship grade Qua Iboe was assessed at Dated Brent plus $0.72/b on Monday, the weakest since April 24, 2009, Platts data showed. Traders said there were still more than 30 Nigerian January loading cargoes unsold, and with the Nigerian February program expected later in the day, differentials were expected to fall steadily if demand did not materialize. “The arbitrage east is almost closed and the OSPs in Middle East are very cheap. The Brent/Dubai spread is wide. There are plenty of alternatives for [Asian] refiners instead of WAF. And, the European refiners are spoilt for choice,” the trader added.

Sources said some offer levels for Qua Iboe, Bonga and Erha had been quite high and as a result a standoff was observed with no buying interest heard at these levels. Despite weak demand some of these offer levels had not yet come off. Qua Iboe was still heard offered at Dated Brent plus $1.20/b and sources said with the provisional February program due later in the week, values could fall sharply if these cargoes did not trade.

A second trader said: “The Angolan January program is sold out thanks to the Chinese but on Nigeria, we still have almost 40 million barrels left [including] some December barrels on storage. The market is very long, in WAF and in the Med.”

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