The United State Energy Information Administration (EIA) has projected that the United States will become a net energy exporter in 2022 in the newly released Annual Energy Outlook 2018 and there are indications that the United States may halt crude oil import from Nigeria by 2022, as it moves closer to becoming a net export of petroleum products.

As US companies divest their assets all over Africa, its seems producing African countries need to prepare for a future in which they may not be able to depend on the West anymore for crude exports.

Before embarking on the looming African problem and the million-dollar question of where all those exports formerly bound for the US will now go, it will be prudent to examine who the US believes it can sell to and why.

Considering crude oil flows, they can be examined from two perspectives: sinks and sources. The sources are the main origins of the flows with some of the key exporting regions being the Middle East, Latin America and West Africa. As for the sinks, they are the key regions to which these barrels drain into.

Generally, crude oil and petroleum products flow to the markets that provide the highest value to exporters. Proximity is a key factor in oil flows, due to transportation costs. Sinks that are relatively closer to sources, provide room for additional margins and in turn higher net revenue. So, if a preferable sink cannot absorb all the oil from a sources reserve, the surplus moves to the next closest sink, and the next and so on, incurring progressively higher transportation costs and lower margins to stay competitive, until all the output is absorbed. However, in practice, trade flows do not always follow the simple “nearest first” pattern. Refinery configurations, and product quality specifications are additional factors that determine the flow pattern of crude. Different markets frequently place different values on particular grades of oil. For example, a low sulfur diesel is worth more in the United States, where the maximum allowable sulfur is 0.05 percent by weight, than in Africa, where the maximum can be 10 to 20 times higher. Similarly, African crudes, low in sulfur, are worth relatively more in Asia, where they may allow a refiner to meet tighter sulfur limits in the region without investing in refinery upgrades. Such differences in valuing quality can be sufficient to overcome transportation cost disadvantages.

It makes sense that the United States will look to Europe first in the short term to absorb most of its crude volumes due to high refining values in Europe and lower transport costs, so it makes a good business case for the United States although, their crude grades will have to battle African crudes which seem to have huge presence in the European market for market share, so US crudes will need to be further discounted to stay even more competitive. Another possibility is Asia. Asia continues to be an ever-growing sink for global crude flows, with waterborne discharge in the region clocking in at around 25 million barrels per day. Deliveries to Asia from the North Sea, the U.S. and West Africa averaged just under 3 million barrels per day in 2017 and has continued soaring this year, with deliveries to Asia from the three sources climbing above 3.5 million barrels per day as at January.

With regard to African producing nations and who they will look to, to fill the gaping US shaped gap in their export revenue, countries such as Nigeria that has been the love child of the US will begin to look towards supplying other markets probably focusing on West Africa. The challenge may be the fact that most African countries are currently also producing nations, not forgetting that the United States also imports a lot of crude from Equatorial Guinea out of one of its most lucrative wells operated by Exxon. That will leave Nigeria in stiff competition with other producing African nations in a race to capture the available free sinks in the region. An area of focus will have to be in supply chain infrastructure. Refineries, storage and jetty terminals, pipelines and stabilization in forex exposure or a regionally accepted trade currency if not the US Dollar. With Dangote’s refinery expected to come on stream soon coupled with Nigeria’s currency swap deal with China’s Yuan, they seem to be taking a few right steps in preparation for this subject matter.

However, in all this sustainability should be the topic for discussion. Further areas and factors for consideration to position Africa in embracing and conquering this new global position include;

Fuel the Power Sector: The IEA, reported in 2017 that 590 million people on the African continent remain without access to electricity, amounting to around 57 percent of the population with countries such as Burundi, Chad, and Malawi, having less than 10 percent of the population being able to access electricity. And by 2030, it is estimated that some 602 million people in Sub-Saharan Africa will still not have access to electricity, an increase from the 588 million people without access in 2016. Nigeria's inability to provide electricity to about 80 million of its people meant that it is the second country after India in the world with more of her population without electricity and the first in Sub-Saharan Africa.

Take Advantage of IMO Bunker and Global Fuel Specification Switch: The International Convention for the Prevention of Pollution from Ships (MARPOL) has expanded the powers of the International Marine Organization (IMO) to regulate the environmental impacts of shipping, calling for a reduction of the maximum sulfur content in marine bunker fuel from 3.50% to 0.50% by 2020. Since 2006, almost all of the petroleum-based diesel fuel available in Europe and North America has been of Ultra Low Sulphur Diesel type. And Africa has a road map to migrate to low Sulphur specification fuels by 2010 for the protection of the environment, human health and sustainable economy. The implementation of restrictions on sulfur emissions in marine fuels can potentially drive up demand for low-sulfur fuels. Low Sulphur crude will be in high demand, and West and North Africa are home to some of the best sweet grades in the world

Improve on Refining Capacity: With the rising consumption rate of fuel across the world, the demand in the global oil refinery market has correspondingly increased, even as margins remain at respectable rates of between $7 and $12 per barrel of crude processed. Hence, the need to rapidly increase sub-Saharan Africa’s refinery market makes sense, because crude oil production far exceeds refinery output; while the domestic market for refined product exists.

Cut Cost and Improve Productivity: The current market conditions means like elsewhere in the world, Africa oil producers must cut down their operating cost by at least one-third and government must understand the new negotiation realities. Many oil and gas exploration companies will find it a lot cheaper and easier to invest in fracking operations in North America or conventional operations on the continent.

Hedging and Longer-term Contracts: It could be mitigated by increased hedging of the positions of the African oil producing countries or entering into longer-term contracts with portfolio players.