30-day Truce Offers Nigeria Room to Claw Back Lost Oil Volumes

There had been incessant bombing of oil facilities in Niger Delta by militants

Chineme Okafor writes that the 30-day ceasefire reportedly agreed by both the federal government and militants in the Niger Delta offers the country the opportunity to restore its oil production volumes to previous levels

Last week, THISDAY exclusively reported that the Nigerian federal government, led by its officials had clinched a deal for a 30-day truce with Niger Delta militants who had engaged in constant disruption of oil production in the Delta since February.

The deal according to the report gives President Muhammadu Buhari’s government some very limited time to come up with a comprehensive plan for the oil-rich region which the militants said was being short-changed by the Nigerian State.

It also offers the country an opportunity to claw back volumes it had lost from the disruptions as predicted by Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, that relative peace could afford the country the chance to climb up by August.

Though, a Twitter account of one of the most prominent armed groups, the Niger Delta Avenger later denied the group had agreed to stop attacking oil facilities and dialogue with the government, the report however noted that Kachikwu was largely instrumental to the reported truce.

Kachikwu before the report of a ceasefire, had stated that the government was in dialogue with the militants. He said the dialogue will lead to a halt in their destruction of oil facilities in the Delta, and that it will involve good spirited stakeholders. He has since continued to push for a resolution to the hostilities.

Following from this, the ceasefire report by THISDAY indicated that government officials eventually reached the truce with major stakeholders in the region involved.

It was also learnt that through back channels, Kachikwu was able to get to the militants and asked that they allow the government sometime to work through their demands and which they agreed to.

As it stands now

Perhaps in line with the spirit and letters of the truce, persistent breaks which had been the situation with oil facilities in the Delta right from February has since stopped.

Monitored reports of the activities of the militants has also shown that the last attack by the militant group took place on June 16, after which there had been no new reported attacks yet.

The Avengers, since February had religiously carried out attacks on oil installations at least on weekly basis. They and other groups have said they were protesting against the Nigerian government, which they alleged was stealing natural resources in the Niger Delta region and refusing to develop the region.

The militants had previously indicated that they would go on with their violent campaign against oil mining in the Delta and not interested in dialogue. They even said at a point that they wouldn’t stop their operations until Nigeria’s oil production dropped to zero, but they may have shifted on this stance with the reported ceasefire.

At the height of their campaign, Nigeria’s oil outages dropped from 2.2 million barrels every day to about 1.6 million barrels. Kachikwu when he announced the overture to negotiate with militant, confirmed the production status.

The development also helped in May to push oil prices rebound to above $50 a barrel – a level not seen since October 2015.

Even so, when the incoming Secretary General of the Organisation of the Petroleum Exporting Countries (OPEC), Mohammed Barkindo, paid a courtesy visit to Buhari in the State House alongside Kachikwu, he stated that he was told the country’s oil production was beginning to rise again.

He also expressed confidence that there would be a ‘stable and permanent solution’ to the hostilities in the Delta.

Exports data from Windward and Thomson Reuters which THISDAY also monitored showed the country’s oil export from April to May had a far smaller drop than observers had predicted.

It said while May production was at 1.37 million barrels per day (bpd) representing a 30 year low, exports for that month dropped by just 62,000bpd to 1.67mbpd, compared to 1.77mbpd in April.

According to it, there was also a rise in exports of top Nigerian grades including Bonga, Agbami, Antan, Amenam, Okwori, which it noted helped to offset the losses from the disruptions.

The data equally indicated that Nigeria exported up to 500,000bpd more than what OPEC thought it had produced in May. James Davis, head of crude supply at FGE Energy was quoted to have explained that the surprising figures were gains from small fields that offset declines from others, perhaps from where outages were mostly recorded.

“The disruptions in the fields that were out was pretty much what we expected; what we didn’t expect was the marginal increases in other fields,” said Davis.

But in an interview in China where Kachikwu spoke on the current status of oil production from Nigeria’s oil fields as well as dialogue with militants in the Niger Delta, he stated that production figures were gradually growing back up.

“All the way from January right through to April of this year, we were producing about 1.9 to 2.2 million barrels per day which is still within the threshold that we budgeted for the year.

“In May and June, we suffered a lot of militant attacks which took us all the way down from 2.2 million barrels to about 1.3 million.

“We have managed to begin to lead conversations with the militants. We have been able to get production back to about 1.9 million barrels a day, we are continuing those conversations and by the time the Forcados is repaired in July, we should be able to come back to expected production ceiling for this year of 2.2 million and begin to look whether we can increase a bit to enable us recover the two to three months hiatus that we had.

“And so, things are looking up, engagements are going on well, we have been able to make inroads into those conversations but what is important is the need to continue that momentum and to look to long term solutions to the Niger Delta crisis that creates the militancy that we have,” he said.

To pave way for proper negotiation, the government has also reportedly ordered a ceasefire of operations by its military troops in the Delta, as well as a withdrawal of fighter jets and battleships that were earlier deployed in the region to fight the militants.

Industry experts however believe this move and the 30-day reported ceasefire, even though its details are still kept in hushes, will have mixed implications for Nigeria’s oil production. According to them, it will in the interim allow the country claw back its lost production volumes which Kachikwu confirmed could happen in July, as well as rebalance its share of OPEC’s production quota.