While many oil and gas producing countries are maximizing the present global crisis to improve output and revenue, rising pipeline sabotage and insecurity in the Niger Delta have continued to hamper the growth outlook for Nigeria’s oil and gas export.
With the country’s gas export at only 60 per cent of its capacity, operators and regulators are concerned about continued shut wells, in protest against theft and sabotage.
In a chat with The Guardian, Chief Executive Officer, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, noted that under-production of crude oil was equally affecting gas production, considering that most of the country’s gas is associated gas.
He expressed worry that no less than 800,000 barrels of oil were shut in from wells due to prevailing challenges. Most key oil fields, terminals and facilities have been experiencing teething problems and a recent resurgence in attacks on oil facilities has exacerbated the situation.
Crude exports of the Bonny Light grade have been on force majeure since mid-March following sabotage attacks on its key pipelines.
Bonny Light production averaged just 30,321 b/d in July, the lowest in many decades, compared with 40,083 b/d in June. Bonny Light output normally averages as high as 250,000 b/d.
The 150,000 b/d Nembe Creek Trunk Line feeding one of Nigeria’s key export grades has come under repeated attack from militants.
Komolafe said: “We are yet to take advantage of the global crisis. This is basically in terms of our depressed production because in a way when you have depressed oil production, you will equally have a depressed gas production especially as we are talking in terms of associated gas as against the non-associated gas.
“It is really very sad that our revenue resources and gas production is asymmetric with increasing international oil prices and the international demand. We have recognized the issue, we are very concerned and it is worrisome to us. Central to the challenge we are having, is the issue of crude oil theft.
“I tell people that our problem is more hinged on the issue of crude oil theft than that of production capacity. Investors are not charity organisations, for them, profitability is key, they are not into charity business. The moment they find out that they are losing in production, the only thing they will resolve is to shut in and once they shut in, they are not only shutting the oil, they are shutting the gas at least for the associated gas, people don’t know that. So you are going to lose in terms of volume of both oil and gas. That is the issue.
“I can tell you that consciously we are collaborating with security agencies. We have a platform where we actually collaborate and I can say that a lot is being done, but the effect is not that seen. We are working on addressing the concerns”.
Indeed, recent data from the NUPRC showed that crude oil production slumped to below one million bpd last month, the lowest level since at least 1990. The country reported oil output of 972,394 bpd in August, down from the 1.083mn bpd recorded for July.
Per OPEC’s latest figures in the August Monthly Oil Market Report (MOMR), Nigerian oil production in July was at 1.183 million bpd, nearly flat compared to 1.176 million bpd in June. Nigeria is under-performing the most among the OPEC+ members bound by the production pact. For July, Nigeria’s crude oil production target was at 1.799 million bpd, which means that the African OPEC producer was more than 600,000 bpd below its target.
OPEC has not yet published its data for August. The organisation uses NUPRC data for its direct communication figure, while secondary sources – often seen as the more reliable figure – come from a number of market participants.
The Federal Government had warned of a shortfall in revenues this year, in part because of the under performing oil sector. In an updated budget, published in August, the state said it had reduced its expected production from the original figure of 1.88mn bpd to 1.6mn bpd.
Actual production in 2021 was 1.48mn bpd. The state expects production to rise to 1.69mn bpd in 2023 and 1.83mn bpd in 2024.
Revenues to the federal government, as of April, were 51% below expectations. The country had earned N285.38 billion ($668.3mn), only 39% of the budgeted amount.