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Oxford Business Group

Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…

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EU Sanctions On Russia Create Opportunity For Emerging Producers

  • EU sanctions disrupt global seaborne crude oil and oil products trade.
  • Brazil and Guyana have become notable suppliers to Europe.
  • Other producers in Africa and Latin America could enter new markets in 2023.

With EU bans on Russian oil and oil-product exports set to go into effect this year in response to Russia’s ongoing war in Ukraine, emerging market producers are poised to gain larger shares of an evolving market.

EU bans against Russian oil products such as diesel were rolled out earlier this month, following bans on Russian seaborne crude oil exports that began last December.

Last week, Patrick Pouyanné, CEO of France’s TotalEnergies, said that there is “no longer a unified oil market… With all these bans, we are creating a grey market for oil.”

While this “grey” market might not be ideal for European international oil companies such as TotalEnergies that still have investments in Russia, emerging markets oil producers in the Middle East, Latin America and Africa – according to their geography, geopolitics, and the crude grade and oil products that they export – are increasingly finding outlets for their growing levels of production as the markets rebalance.

Meeting European demand

The EU has had little difficulty in sourcing crude oil since it announced the ban last May, as the market had time to prepare for the December implementation.

The largest incremental increase in crude imports in 2022 came from Norway’s Sverdrup field, which added 340,000 barrels per day (bpd) of medium sour grade that is similar to the sour Urals crude that the EU banned from Russia.

Another large increase came from the US, which saw its export volumes increase by 52.2% in the January-September 2022 period and nearly 1.7m bpd in December, the highest level in over two years. US shale production is also set to rise by 75,000 barrels in March to reach a record 9.4m bpd. US domestic demand declined in 2022 due to an economic slowdown, the use of more electric vehicles and greater fuel efficiency, which has freed up supply for export.

Related: Oil Prices Drop As Bearish Sentiment Builds

Last May, OBG argued that emerging markets oil producers would be able to gain new market share as Europe searches for seaborne oil imports, which rose by 12.3% in 2022.

Among emerging markets, Saudi Arabia made the largest contribution by increasing its direct seaborne exports to EU by 126%, from 4.6m tonnes in 2021 to 10.3m tonnes in 2022. The country’s diesel-rich, low-sulphur crude meets the EU’s demand and grade requirements for both crude oil and oil products.

The Kingdom has long been the largest exporter of seaborne crude oil. Its outgoing seaborne exports rose by 17.2% in 2022 to 362.8m tonnes, with total exports from the Gulf that year growing 12.7% to 879.3m tonnes, accounting for 42.9% of global seaborne crude oil trade.

However, Europe only accounted for 10.7% of total Saudi exports. The bulk of Saudi cargoes that year went to Asia – with the country notching export increases of 14.2% to Japan, 17% to South Korea, 19.2% to India and 35% to members of the Association of South-East Asian Nations – as it is keen to maintain its market share in Asia and compete with Russia.

In 2022 Russia’s seaborne exports were also up 10.3% to 218.5m tonnes, shipping record amounts to countries like China, India and Turkey at discounted prices. US exports, meanwhile, rose by 22.3% to 164.3m tonnes.

Latin America’s potential

Brazil and Guyana are also playing expanding exports to Europe and – along with Canada, Norway and the US – are expected to reach record production levels in 2023 and expand global oil supply by 1.2m bpd, according to the International Energy Agency.

Of these emerging markets, Brazil redirecting flows from China and India, to the Americas and Europe in 2022. The country has plans for four new offshore production units to come online this year to add 480,000 bpd of new capacity.

Brazil’s annual exports of ethanol to Europe reached 600m litres, eclipsing its previous export record of 477m litres in 2010, as European demand for the biofuel grew amid high natural gas prices, and the EU’s efforts to accelerate its energy transition and forego Russian hydrocarbons.

Considering Brazil’s plans to scale up and export green hydrogen to Europe, these new export relationships in oil and ethanol can lay a foundation for clean energy ambitions in the future.

Meanwhile, the small Latin American country of Guyana continues to realise impressive oil-production growth, freeing up much-needed volumes for Europe. The country grew its oil exports by 164% to 265,693 bpd in 2022, up from 100,645 bpd in 2021, with Europe receiving 49% of these outbound cargoes.

Guyana’s long-term prospects are bullish, with consultancy Rystad Energy predicting the country increase its overall production from 360,000 bpd in 2022 to 830,000 bpd in 2025, 1m bpd in 2030 and 1.7m bpd in 2035. Indeed, its proximity to Europe offers oil-demand security for its future.

Additional potential volumes

Other emerging markets oil producers have potential to ramp up production, but the expected volume and destinations of exports, as well as whether production goals will be realised, remain to be seen.


Argentina is among the most promising, as its large-scale Vaca Muerte shale field comes on-line after years of development. The country’s unconventional oil production reached 282,000 bpd in December 2022 – the highest in a single month – equating to 45% of Argentina’s total production of 622,500 bpd that month, the country’s best performance since 2009. The number of export requests filed in January to the country’s federal energy department rose to 39 in January, up from 35 in December and 34 in November, as producers forecast export opportunities in the year ahead.

Nigeria, historically an exporter to Europe and the Americas, could also play an enhanced role. Last Friday, the group chief executive of state-owned oil company Nigerian National Petroleum Corporation announced that its monthly output reached 1.6m bpd, up from under 1m bpd in July of last year, when the country’s exports reached their lowest levels in 25 years due to oil theft. Nigeria’s oil-rig count now stands at 13, its highest level since January 2020.

Looking to capitalise on higher demand for refined products in the wake of the EU’s ban, Trinidad and Tobago recently invited its oil-rich neighbours Guyana and Venezuela to process oil in the country and has a 140,000-bpd refinery ready for the task.

However, some Latin American countries are retreating from the oil-export market. Mexico, once Latin America’s top producer, is now a net importer, and its three-month moving average of exports was down 5.5% month-over-month in December. Meanwhile, Colombian President Gustavo Petro – who campaigned last year on moving the country away from reliance on fossil fuel revenue and developing agriculture, renewable energy and tourism – raised taxes on the oil industry and pledged to stop giving new oil and gas exploration licences since his inauguration in August.

By Oxford Business Group

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  • Mamdouh Salameh on February 27 2023 said:
    The Ukraine conflict and the unprecedented Western sanctions against Russia and bans and price caps on its exports of crude and petroleum products which followed have led to a shift in the flow of Russian oil and gas exports from the West to the East meaning from the EU to the Asia-Pacific region.

    Russia hasn’t only found markets in Asia for its entire oil and gas exports but it has managed to displace Saudi Arabia and Iraq from the top slots in both China and India respectively. Between them, China and India are projected to import 3-4-3.7 million barrels a day (mbd) of Russian crude this year. Moreover, Russia was so successful in finding new markets for its oil that it exported 8.2 mbd of crude and petroleum products in January 2023 or 2.5% higher than its pre-Ukraine export figure of 8.0 mbd.

    Therefore, whatever exports Saudi Arabia, Iraq and the Gulf region have lost to Russia in the Asia-Pacific region will have to be recovered in the EU. This isn’t creating opportunities for emerging markets but merely replacing what has been lost in the Asia-Pacific region.

    And while Norway has replaced the Urals crude that Russia used to export to the EU, China, India and Asian countries couldn’t get enough of it at a price far above the cap based on calculations from academics at the Institute of International Finance at Columbia University and the University of California and not at a discount of $31 a barrel which Western media was claiming.

    The United States exports some of its extra light crude to the EU in exchange for medium and heavy crudes it imports from somewhere else in exchange for use in its refineries which are tooled to process the heavier crudes. So these are not net exports.

    US shale oil is a spent force incapable of raising its production meaningfully whilst Brazil could hardly satisfy its domestic demand. Guyana’s production potential is being inflated beyond reality probably to improve ExxonMobil’s market valuation.

    Meanwhile. Nigeria could hardly meet its OPEC+’s production quota whilst some Latin American countries such as Mexico and Columbia are retreating from the oil-export market Altogether.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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