* Third of Nigeria, Algerian exports in limbo as shale booms
* Price war between oil exporters seen heating up
* Asian refiners prefer heavier, diesel rich grades
By Julia Payne and Emma Farge
LONDON/GENEVA, Feb 26 African crude exports to
the United States could slip to a trickle this year as the
world's top oil consumer enjoys a shale oil boom, allowing
China, often now the buyer of last resort, to become ever more
The dire prospects for West African and Algerian exports to
the U.S. is also stoking competition among producers, which must
sell to a reduced pool of Asian and European clients.
And the growing glut of sweet oil in the Atlantic Basin has
already started creating price havoc from last year and this
will likely heat up in 2013.
Angola has lost the U.S as its top buyer, which last year
accounted for just 11 percent of exports, behind China and
"There will be a greater competition to make up for a fall
in sales to its (Angola's) once largest market and ... oil
prices may fall as a consequence," Sandra Julio, President and
CEO of Angolan state oil firm Sonangol's trading branch, said in
a company document.
Analysts estimate that some 900,000 bpd of Nigerian and
Algerian crude oil, accounting for more than 1 percent of global
supply, is soon to be displaced in the U.S. market by shale oil.
Top U.S. refiners Valero and Phillips 66
said they have stopped importing light, sweet oil to the U.S.
Gulf coast as new shale oil production combined with better
pipeline flows has yielded cheaper domestic alternatives.
"The Seaway ramp-up and the other pipeline start-ups make it
possible that WAF (West African) flows to the U.S. will fall to
zero by end-2013," Citi analysts said, referring to the pipeline
linking the U.S. mid-continent to Gulf Coast refiners.
For a graphic of U.S. imports by country see:
Nigeria currently exports about 700,000 bpd, or one third,
of its crude to the United States out of a total of 2
million-2.2 million bpd. At its peak, Nigeria used to export
around 1.6 million to the U.S.
Nigeria's standard crude Qua Iboe traditionally sells at a
premium of $1-$3 per barrel to benchmark Brent and Algeria's
Saharan Blend at between flat to a premium of $2 per barrel.
Both grades have traded regularly below traditional levels
in the past 12 months. A 10-cent drop in prices for Nigeria's
oil means a yearly loss of around $70 million.
Nigeria has already sold cargoes for around 40 cents less
than the official selling price this year, according to
estimates by the pan-African Ecobank.
Nearly half of Algeria's exports of around 650,000 bpd used
to go to the Americas, mostly to the U.S. Gulf coast but now the
total trans-Atlantic volume fluctuates at around a third of
exports and are nearly all absorbed into Quebec, Canada.
That means close to 200,000 bpd of Algeria's light sweet
Saharan Blend crude oil exports will also be seeking new
Valero is set to buy more U.S. light sweet crude for its
265,000 bpd Canadian refinery in Saint-Romuald, Quebec starting
at the end of the year.
TOO LIGHT FOR ASIA
Producers of the light, sweet crudes have been able to
divert some cargoes eastwards and West African exports to Asia
rose to a record high last year.
But a flattening in Chinese demand and a preference for
diesel-rich heavier grades at new refineries will cap demand.
"Asian refiners do not like light grades. They like sweet
medium grades," a Chinese trader said, adding Libyan crude and
some relatively cheap Australian light grades suit Asia better.
Refinery closures in Europe have increased competition among
African producers for Asian clients and Libya - once mostly an
exporter to Europe - now counts China as its number 2 buyer,
after Italy, with 13 percent of purchases.
Recent import tenders show that Asian buyers like Indian Oil
Corp and Indonesia's Petral flit between purchases from Algeria,
Libya and Nigeria, depending on who can offer the best price.
Exports of Algerian crude to Asia spiked in late spring of
2012 but mainly because Saharan Blend dropped to over a $3
discount to dated Brent, a record low.
Algerian crude already competes with West African crudes in
Northwest Europe to replace depleting North Sea production, but
the competition will intensify as even Canadian grades will need
to find new buyers.
The shale boom in the U.S. has also started displacing
Canada's own exports from Newfoundland. More than 2 million
barrels of Canadian crude reached Northwest Europe between
December and January and some will go as far as Chile in March.
The process of revising prices to be more competitive is
likely to be painful for countries like Nigeria which are used
to charging a big premium for their gasoline-rich oil, ideally
matched for U.S. refiners and once considered top quality oil.
"At these prices Asia is not going to take more than they
are currently taking," said a trader with a Chinese refiner.
Prices for West African crude, set at a differential to
global crude benchmark dated Brent, are at risk of falling
steeply in order to lure more buyers, Citi said.
"U.S. shale oil and an increase in their gas production is
already affecting our exports to the United States. Bear in mind
that the United States is one of our major importers in this
sector," Nigerian Oil Minister Diezani Alison-Madueke was quoted
as saying at a conference in Abuja last week.
For a related story, see:
(Additional reporting by Dasha Afanasieva; editing by James