“Looking at global sources of supply, West Africa and the gulf of Guinea is one such source of supply globally and there have been some supply headwinds in recent times primarily as a result of disruptions to Nigerian production from oil theft as well as some of the force measures that have been declared,” Akinkugbe, head of research, Ecobank told CNBC Africa.
“So in different parts of the global oil hotspots you basically have potential supply headwinds and the markets are generally pricing a risk premium into the global benchmarks.”
Recent oil supply disruptions in Nigeria could cripple the country’s robust oil economy and could cause the county to lose more money than what it already has from oil theft. Crude oil supply disruptions have already caused a dip in crude oil exports to Asia. Nigeria is still losing almost 200 000 to 250 000 barrels to crude oil theft regionally and Akinkugbe explains that the problem is unlikely to dissipate anytime soon.
“In the highly unlikely scenario that trade were to be disrupted completely we could be looking at a higher energy cost all round and obviously this could potentially feed into higher pump prices in West Africa,” added Akinkugbe.
Recent divestments from international oil companies Petrobras, Shell and Chevron have added to the fragility of Nigeria’s oil sector. Some of the divestments were spurred on by the rise of insecurity in the onshore Niger Delta region and the oil theft.
The deep offshore region in Nigeria is still however one of the most attractive regions in terms of its reserves bay.
Smaller West African countries such as Benin and Togo are estimated at being able to have an oil reserves base of close to 40 billion barrels and are seeing growing interest from multinational oil companies.
“There’s a different profile of risks across each country and what you’ll find is when you take the typical multinational, they will have different strategies going into each country in the region and clearly now for a lot of multinationals in Nigeria the strategy is increasingly focused away from the onshore part to the offshore,” said Akinkugbe.