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Stakeholders envision further drop in oil production

By Sebastine Obasi

Stakeholders in Nigeria’s oil and gas industry predict that the country may suffer even lower crude output than stated in last week’s report by the International Energy Agency, IEA, that Nigeria’s crude oil output declined to a six-month low to 1.96 million barrels per day, mbd contrary to budget benchmark of 2.567mbd.

The immediate past president of the National Association of Petroleum Explorationists, NAPE, Mr. Afe Mayowa, argued that the drop in oil production did not come as a surprise, as many stakeholders had showed anxiety in the beginning of 2013 when government made the 2.567mbd benchmark.


For them, it was an ambitious projection. “I am not surprised because all the attendant problems in the Niger Delta are still there – community issues, vandalism, PIB. The PIB will not be passed in the life of this administration because those who are supposed to make it come to light are more concerned about their personal gains rather than national interest.

“Also, vandalism is not restricted to Niger Delta. It now occurs in Ogun, Ondo, Lagos and other areas where we have pipelines. Therefore, the decline will go on and it will definitely affect our economy negatively,” he said.

Similarly, the Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, said that the union was worried and disturbed over the drop in crude oil production in the country, since the first quarter of 2013.

NUPENG blamed the drop on incessant crude oil theft and pipeline vandalism and urged the Federal Government to take urgent measures to stem the decline, to ensure that revenue accruing to the government was not affected.

“Government must change tactics and strategies in the fight against crude oil theft and pipeline vandalism. We urge the Federal Government to introduce new technology like monitoring sensors and alarm systems that will trigger off whenever any pipeline is being tampered with,” the Union said.

The Union argued that such measures, with the collaboration of the host communities where these pipelines traverse would check crude oil theft from the pipelines.

It noted that the decline would also affect the country’s external reserves and further compound the incidence of abandonment of projects in Nigeria.

The Union called on the oil majors and the government to create job opportunities for the restless youths in the Niger Delta, so that they would stop tampering with the pipelines. “The issue of mass unemployment should be tackled with vigour because it has become a time-bomb, waiting to explode,” Achese Igwe, National President of the Union said.

NUPENG also suggested that if the Nigerian National Petroleum Corporation, NNPC, could bury the pipelines deeply underground, the pipelines would become inaccessible to oil thieves and the vandals.

Oil and gas account for about 90 percent of Nigerian government revenues and 90 percent of foreign exchange earnings.

IEA Report

The IEA reported last week that Nigeria’s crude oil output declined to a six-month low of 1.96mbd. The agency attributed the decline to oil theft and pipeline vandalism, which had bedeviled the industry for a long time.

The IEA’s report underscored recent statement by the NNPC, which said that 53 break points were discovered along the 97km Nembe Creek Trunk line.

“This will further reduce our April and May monthly average to about 2.2mbpd and further decrease crude oil revenue by about $554 million (N83 billion) that should have accrued to the Federation Account,” the corporation said.

“We shall continue to work with relevant government agencies both at the federal and state levels; to end this incessant crude oil theft and pipeline vandalism. We have the potential to meet the national target of 2.48mbpd if this menace is eliminated,” it added.

In April, the NNPC reported a drop in crude oil production in the first quarter of 2013, January to March, which caused Nigeria a loss of oil revenue of about $1.23 billion (N190 billion). The corporation also attributed the drop in revenue to the incessant theft of Nigeria’s crude oil and vandalism along major crude pipelines in the Niger Delta region.

With this development, Angolan crude oil is poised to outshine Nigerian barrels in the coming months, with the discount for the relatively heavy, sour crude likely to shrink because of shifting demand dynamics and the unreliability of Nigerian supply.

Combined with weaker output levels, this will put the brakes on growth for Nigeria, Africa’s second largest economy, and for decades the leading supplier of crude oil from the continent. “Refiners are seeking heavier grades now because there is more value, and I would expect this trend to continue,” Rolake Akinkugbe, head of energy research at the pan-African Ecobank Group, said.

However, other oil producing nations among the Organisation of the Petroleum Exporting Countries, OPEC fold fared much better.

According to the IEA, Saudi Arabia, OPEC’s biggest producer led the production gainers, with output jumping by 220,000 bd to a six-month high level of 9.56 mbd, which was attributed to a seasonal increase for domestic use to meet peak air-conditioning needs.

Despite international sanctions over its disputed nuclear programme, Iran’s output edged up 30,000 bd to 2.68 mbd in May.

The IEA estimated that imports of Iranian crude jumped to 1.39 mbd in May from 835 in April, which was mostly due to congestion at Chinese ports at the end of April delaying deliveries until May.

Another country that recorded increase in production is

Kuwait. Its production edged up to 2.84 mbd. Angolan production edged up to 1.78 mbd, with several fields expected to increase output to peak capacity within the next year and other fields to come on line. Also, the United Arab Emirate, UAE, edged up its output to 2.73 mbd, while Qatar wasunchanged at 725,000 bd.


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