* Nigerian oil increasingly headed to Los Angeles refineries
* Lack of pipeline, shipping law encumber U.S. Gulf loadings
* Favourable export window may soon shut
By Noah Browning and Libby George
LONDON/LAGOS, Sept 9 (Reuters) - Nigeria's oil, displaced by
U.S. shale, has found an unlikely new outlet this year: the
coast of the continental United States that is farthest from the
African country's shores.
The shale boom has upended the global market, turning the
United States from a keen buyer of Nigerian oil to an aggressive
competitor.
But no pipelines easily connect the shale hub at the Permian
basin, located in Texas and New Mexico, to the West Coast,
driving the latter to look to Nigeria to quench its thirst for
crude.
Early this year, Californian refineries began loading up on
Nigerian oil – taking cargoes of Qua Iboe, Bonga, Erha, Forcados
and others, according to traders and Refinitiv Eikon data.
The more than 6 million barrels that the U.S. West Coast
imported from Nigeria between April and August this year was
almost four times higher than the amount for all of 2018.
The route is relatively rare for cargoes that must weather
the 20,000-km (12,500-mile), 40-day journey from Nigeria's lush
coasts, around South America's Tierra del Fuego and up to Los
Angeles.
Marathon Oil (NYSE:MRO) MRO.N at its Long Beach refinery has been the
most consistent buyer, with another very large crude carrier
(VLCC) full of Forcados oil departing Nigeria on Thursday.
Traders said a combination of market factors – including the
difficulty and expense of getting U.S. crude oil to the West
Coast – made Nigerian grades attractive.
"It makes more cost sense. Even if U.S. crude is closer on
the map, when you factor in the price and availability of taking
in barrels from Louisiana or Nigeria, Nigeria came out cheaper,"
one seller of West African oil said.
The purchases are a rare glimmer of hope this year for
Nigerian oil, which now competes with U.S. shale for buyers,
including in its top outlet, India.
The United States had historically been a heavy importer of
crude oil, but shale production, coupled with the lifting of a
four-decade export ban, transformed it into a net exporter of
oil and fuels by late last year. Barrels from this U.S. oil bonanza sailing to domestic
shores face added costs, however, due to a century-old law
called the Jones Act, which mandates that only U.S.-flagged
vessels can transport it.
The restriction often makes freight within the United States
more costly than much longer journeys.
But traders warn the surprise opening of the West
Africa-West Coast export window, or arb, could be short-lived
due to the timescales and distance involved.
"The arb may be already shutting. The price factors which
made a cargo exporting today look like a good deal would have
been happening over a month ago when the deal was made," a major
buyer of West African oil said.
"They won't be the same today and certainly won't be the
same over a month from now when the cargo arrives."
The need to refine oil into low-sulphur shipping fuels in
time for stricter environmental rules on Jan. 1 may also have
lured those cargoes, as West Africa is home to the kinds of
crude most suited to such products. This boon could be fleeting
too. "The honeymoon will be over in a year from now," said Ehsan
Ul-Haq, lead analyst with Refinitiv.
"At present, all refiners are desperate to produce marine
gasoil or very low-sulphur fuel oil. Once the market reaches
equilibrium ... there will be less interest."
Nigerian oil to U.S. West Coast https://tmsnrt.rs/2PSUySO
Routes of selected West African oil cargoes discharging in
California https://tmsnrt.rs/2MYlgXV
U.S. Imports from Nigeria of Crude Oil https://tmsnrt.rs/3171X1P
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>