August 23, 2016

Nigeria’s oil production to remain down through 2017

Nigeria’s oil production to remain down through 2017

File Photo: Crude Oil

*As output drops to 295 million barrels in 5 months

By Michael Eboh & Ediri Ejoh

AGAINST the positive picture painted on possible rise in the price of crude oil at the international market above USD50 per barrel, Nigeria may be left out of reaping this fortune as the United States Energy Information Administration, EIA, projected a negative downturn for the country’s crude oil production growth this year.

CRUDE-OILThe report is coming as a data from the Nigerian National Petroleum Corporation, NNPC, indicated a steady decline in output since January with the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, buttressing the gloomy picture of Nigeria amidst the international price recovery.

Nigeria’s crude oil production in the five months to May 2016 dropped to 295.09 million barrels, showing a shortfall of 36.15 million barrels or 10.91 per cent from 331.24 million barrels recorded in the preceding five months of August-December, 2015.

The January-May 2016 output translated to an average daily crude oil output of 1.97 million barrels per day (mbpd), according to data released by the Nigerian National Petroleum Corporation, NNPC.

The output level reflected the impact of production shut-ins following increased militancy siege on oil installations.

However, with interim reports showing further declines in output in the months of June to date, subsequent data from NNPC would reflect a further drop in cumulative production level, which would also mean increased cost of militancy to the government.

United States’ Energy Information Administration (EIA) had put the average crude oil price for the first five months of 2016 at USD37.882 per barrel, compared to an average of USD44.97 per barrel in the last five months of 2015.

This meant that Nigeria earned about USD11.18 billion in the first five months of 2016, an equivalent of N2.2 trillion, using the official exchange rate of N197 to a dollar as at that period.

Month-on-month analysis of the country’s crude oil output showed a steady decline since January this year.

January 2016 output was 66.49 million barrels which translated to an average of 2.22 million barrels per day, while in February, 59.27 million barrels was produced, giving an average of 1.98 million barrels per day.

In March, April and May 2016, 57.43 million, 59.56 million and 52.34 million barrels were produced, translating to a daily average of 1.91 million, 1.99 million and 1.74 million barrels respectively.

EIA data indicates that Nigerian oil production would remain depressed through 2017 as a result of militant attacks.

The data also indicated that despite the discordant tone over possible agreement on production cut back by OPEC members as they meet next month, oil prices would rebound beyond USD50 per barrel in the weeks ahead.

Factors helping the rebound would include production set-backs in Nigeria due to militancy.

Corroborating this situation and the impact on the economy, Kachikwu recently noted that between January and June 2016, over 1,600 incidents of vandalism was recorded resulting in a loss of 109 million liters of petroleum products and 560,000 barrels of crude oil to refineries.

According to him, “An additional 1.1mbpd is required between now and year end to meet targeted annual production.”

He explained that compared to the 2.2mbpd targeted in the budget, the country currently produces 1.56mbpd showing a shortfall of 0.7mbpd, translating to 29.1 per cent shortfall.

He further added that for the desired diversification of the nation’s economic program to be successful, “the government will still have to depend on the petroleum sector to provide the required funds needed for growth.”

Meanwhile, the NNPC oil output data shows that on a sector-by-sector analysis, companies in the Joint Venture Alternative Finance/Modified Carrying Agreement (MCA) accounted for 46.94 per cent of total crude oil output, with the production of 138.54 million barrels of crude oil in the first five months of 2016, translating to a daily average of 0.92 million barrels.

Companies operating under the Production Sharing Contract (PSC) arrangement followed with crude oil output of 132.89 million barrels for the five-month period, representing 45.03 per cent of the total and an a average daily output of 0.89 million barrels.

Joint Venture companies recorded a total combined crude oil output of 95.23 million in the period under review, accounting for 32.27 per cent of total output in the period. It also represented an average of 0.63 million barrels per day crude oil output.

Independents/Sole Risk companies and Marginal Fields companies recorded 14.23 million barrels and 8.38 million barrels in the five-month period, representing 4.82 per cent and 2.84 per cent respectively.

Service Contract sector, comprising only Agip Energy and Natural Resources Limited, recorded 1.045 million barrels of crude oil output, representing 0.35 per cent of total crude oil output in the period under review.