Lagos — Nigeria and Angola had contrasting fortunes in 2009 as they vied for the number one producer spot in the region. Yet the two top African petroleum producers appear set to enter a fiercer competition this year for prime supply contracts at premium export prices.

Angola briefly overtook Nigeria in the middle of the year as oil production was severely hampered by a wave of militant attacks in the oil-rich Niger Delta.

Estimates put exports for Angola and Nigeria in August at around 1.78 million b/d and 1.75 million b/d respectively.

The pattern leading to the reversal was set early in the year.

Angola saw increased output along with rising differentials for its crudes and an upturn in demand from the East, leading it to become China's top supplier in August.

Angola, encouraged by post-war stability, was able to bring new fields online and launch its latest grade, Gambia, in the first quarter of the year.

Nigeria's year conversely got off to a bad start as a series of attacks on oil installations in the Niger Delta led to a production slump, allowing Angola to briefly ascend to the top producing spot.

A number of force majeures were declared on Nigerian crude grades during the year, mirroring the events of previous years, as attacks on the Bonny Light, Forcados, Escravos and Brass River cut production.

The situation deteriorated with "all-out war" being declared by Nigeria's main militant group the Movement for the Emancipation of the Niger Delta (MEND) which launched a wave of attacks in the earlier part of the year.

Nigeria subsequently struggled to produce enough even to meet its OPEC quota. Production at one stage slumped by over 50 percent of normal levels to less than 1.5 million b/d.

Nigeria was only able to reassert its position as number one oil producer on the continent after the amnesty, granted to militants August 6 by President Umaru Yar'Adua, saw violence give way to a rise in production.

The amnesty proved so successful that in its wake, oil production approached the 2 million b/d mark.

Although Angola's export push was partially held back by OPEC quotas, cuts in production from other OPEC countries led to refiners seeking Angola's crude as an alternative source of supply.

As OPEC production cuts began to take hold around the end of January, differentials to Dated Brent for some Angolan crudes set new highs.

Key medium Angolan crude Hungo grade saw its differential breach Dated Brent minus $3/barrel for the first time at the end of January, according to assessments by the Platts Energy group.

Differentials for Angolan grades continued to steadily rise and set new highs as tight availability was coupled with supportive refinery margins and relative strength in fuel oil.

Cabinda, Girassol and Kissanje crude grades were all assessed at premiums to Dated Brent for the first time in March.

A steady rise in Chinese demand for Angolan crudes through the year provided support to prices as Angola took Saudi Arabia's spot as China's number one supplier.

In October, China imported 53 percent more crude from Angola than in the corresponding month in 2008.

It was a different story for Nigeria.

Despite the slump in production and tightening supply of Nigeria's crudes there followed a drop in buying interest from Western refiners who typically buy Nigeria's light sweet petrol-yielding crudes.

This was partly due to poor refining economics in the West and the avoidance of Nigeria's crude crude oil contracts, due to the instability of supply.

Business Champion had reported last year that series of force majeure by operating companies in the country, especially Shell, Agip, and Chevron as a result of security incidents in the Niger Delta was turning away callers for Nigerian supply contracts in the futures market.

This led to an overhang of cargoes and a subsequent collapse of the premiums Nigeria's crudes commanded over Dated Brent to four year-lows.

Key grades Bonny Light and Qua Iboe slumped to a 17.5 cents/b premium to Dated Brent.

Brass River saw its premium to Dated Brent suffer from the major disruption of the militant attacks, moving at one stage into a discount for the first time since 2005.

Its differential slumped in April to Dated Brent minus 22.50 cents/b.

The contrasting situation between the two countries was illustrated by the narrowing spread between the prices for Nigerian and Angolan crudes.

The Qua Iboe/Cabinda spread narrowed to $2.50/b, its slimmest point since 2004.

Nigeria's recovery in the third quarter gathered momentum as security and peace in the country prevailed.

By November, its oil output crossed the 2 million b/d mark for the first time in over a year.

The increase in production also led to a partial recovery for its various crude oil grades from the lows earlier in the year, although they still remained some way below 2008 levels.

Qua Iboe traded through 2009 at an average premium of $1.48/b to Dated Brent, almost $1/b below its three year average of Dated Brent plus $2.38/b.

Angolan crude in contrast traded through the year almost constantly higher than in 2008 as sustained demand pressure from China and an increase in demand from India continued to provide price support.

The discount Hungo commanded to Dated Brent was $2/b less through 2009 than its three-year average. Its 2009 average differential was Dated Brent minus $1.64/b compared the three year average of Dated Brent minus $3.80/b.

Both countries are hoping to increase crude production in 2010, with 2009 ending on a constructive note for both countries.

In Nigeria, the outlook for the country is positive having seen a successful amnesty and the militants' ceasefire holding far longer than expected.

Oil is still being discovered in the region and new streams continue to come online.

In the Niger Delta, the situation at the year end seems more stable than it has done in recent years.

In Angola, its crude continues to be highly sought after by China as it looks to raise both its production and status as an oil producer.

The net benefit to West Africa is that with its two oil powerhouses racing to produce at full-steam, which country is the actual number one producer may perhaps become irrelevant.

If the second half of the year is anything to go by, a "win-win" year for Sub-Saharan Africa's oil giants could be the story of 2010.