U.S.-Africa Win, Europe Loses if Russian Energy Sanctioned

By Pat Davis Szymczak, April 22, 2014

the U.S. is becoming a big competitor to Russia in the European market with exports coming out of the Gulf of Mexico and even from the Atlantic coast,” Bonnington said.

U.S. crude imports today are negligible. In 2013, the United States imported 45,00 bl/d of crude from Russia compared to 300,000 to 400,000 bl/d three years ago. Rising domestic oil production from shale has resulted in the U.S. becoming essentially energy independent.

“West Africa has been the most impacted,” said Bonnington. “Nigerian and Algerian crude is now just a trickle” … whereas just a couple of years ago, they were the primary source of U.S. crude imports. Both Nigeria and Algeria have, as a result, sought to replace U.S. crude buyers with European customers.

“There are no current sanctions on Russian crude, but if there were, it would provide a growing opportunity for African crude producers,” Bonnington said. And state oil companies in the Caspian are signaling their readiness to help fill any shortfall if relations with Russia remain strained.

Meanwhile, Houston and other U.S. Gulf of Mexico refinery centers are shipping VGO and straight run fuel oil to Europe, presenting Europe with an alternative to Russian refined products. “The U.S. and Russia are both big sources of supply for the European refining and petrochemical industry,” said Elliott.

“It is certainly possible the U.S. can, or could, divert to a portion of their (middle distillate) exports to Central and South America to Europe to make up for any shortfall in Russian exports if the price is right. The U.S. (also) does have the capacity to increase middle distillate production.”

Understanding these market forces, Russia had begun looking to grow new markets in Asia, long before the Crimean crisis. “Russia has even said they want to focus more on Asian than on Europe,” Elliott said. Russia has been negotiating to sign oil deals with China, Japan and South Korea. Rosneft CEO “Igor Sechin was in India a couple of weeks ago to tie up India in long-term contracts. That has never happened before.

“If Russia’s relations with the West deteriorate, they have other markets lined up to take the oil,” he added.

And as for that ace that Russia always has up its sleeve – gas – the U.S. does represent a long-term threat. “It is early stages,” said Elliott. “The U.S. is not set up at this point to be a player in the international gas market but European officials are making statements that they want to diversify and they are pointing to the U.S. as a (potential) player.”
 
Copyright, Oil&Gas Eurasia, 2014.