The Unending Woes of Nigeria’s Crude oil Production

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……….Nigeria drops to all-time low
……….Report blames pipeline closures, maintenance and oil theft

The Organisation of the Petroleum Exporting Countries (OPEC), has reported that seven countries, including Nigeria, recorded significant lows in crude oil production in May 2220.

In the latest OPEC Monthly Oil Market Report (MOMR) for May 2022, the cartel said however that six countries increased their crude oil output.

The report said that crude oil output increased in Saudi Arabia, the United Arab Emirates, Kuwait, Angola, Algeria, and Congo, while production in Libya, Nigeria, Iraq, Gabon, Venezuela, Iran and Equatorial Guinea declined.

The OPEC report is coming on the heels of a damning report by Platts that the poor production reports from Nigerian is owed to pipeline closures and maintenance at major fields and crude oil theft.

Quoting a senior official from Nigeria’s oil ministry, S&P Global Commodity Insights said the fields that feeds to two major exports grade — Bonny Light and Qua Iboe — were down on maintenance in May, even though output was “gradually returning.”

With over 3.65 million barrels of crude oil shut-in at the Bonny Terminal during the March/April productions circle, Nigeria’s total losses, month-on-month rose by over 300%.

An analysis of the figures from the Nigerian National Petroleum Company (NNPC) indicated that the huge loss was due to a force majeure on the critical line which supplies a substantial part of the country’s export.

Between March 3 and April 1, the production curtailment pushed the country’s total loss to 5.545 million barrels of crude for the month as opposed to 1.69 million barrels previously.

At the time, the 1.69 million barrels’ losses, although huge, was seen as a major improvement on the January 2022 high of 7.5 million barrels lost to the phenomenon, a development that has negatively impacted the country’s capacity to export the commodity.

Nigeria has for over a year been unable to meet the production quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC). The country’s upstream petroleum sector has also struggled in the last one year, due to deteriorating facilities occasioned by waning investment as well as oil theft.

So far in 2022, the Nigerian National Petroleum Company (NNPC) has failed to remit its statutory funding of the Federation Account, a joint pool collectively operated by the federal, state and local governments despite the rising international prices of oil.

Bonny was followed by Odudu terminal which experienced a whopping 937,663 barrels leakage due to what the NNPC described as maintenance work.

But the challenge appeared to have worsened in May as the S&P reported quoted other industry sources as saying that the Nembe Creek and Trans Forcados pipelines had repeatedly come under sabotage, and flow through the lines had been sporadic in the past month.

“Africa’s largest oil producer has had to deal with a barrage of security, operational and technical problems at its key oil infrastructure since early 2021,” Platts said.

S&P noted that crude and condensate production in May fell 14% month on month to 1.279 million barrels per day, quoting data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

That was the lowest in more than three decades. Nigeria has seen its crude and condensate production drop to almost half its production capacity of around 2.2 million bpd.

A majority of key oil fields, terminals and facilities have been experiencing teething problems and a recent resurgence in attacks on oil facilities have exacerbated the situation.

Rising pipeline sabotage and insecurity in the Niger Delta are also hampering the growth outlook for Africa’s largest oil producer.

In a recent note, Platts Analytics said it expected Nigerian crude supply to rise to 1.5 million bpd from the fourth quarter of 2022 from 1.4 million bpd in April.

“Political risks may worsen ahead of elections in early 2023,” Platts Analytics said. “Production has averaged about 300,000 bpd below its OPEC+ quota since mid-2021 due to technical outages, theft and sabotage and force majeure.”

The declining oil production comes at a difficult time for Nigeria, which is also fighting a wave of divestments from international oil companies.

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