Nigeria Struggles to Meet OPEC’s Crude Oil Quota

•Records 2.8m barrels supply shortfall in August

Emmanuel Addeh in Abuja

Despite requesting for a higher baseline in August, Nigeria failed to meet the existing crude oil supply quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC) during the month, THISDAY’s investigation revealed yesterday.

The country lost 90,000 barrels per day in August, or roughly 2.8 million barrels in the month, making last month’s production of 1.43 million bpd one of the lowest in five years.

While Saudi Arabia and Iraq were the main drivers of OPEC’s production for August, with additional production of 290,000 bpd and 200,000 bpd, respectively, Nigeria, which can produce two million bpd, other things being equal, slumped from its July figure of 1.520 million bpd, according to an OPEC document.

Production growth in Nigeria, Africa’s highest oil producer, going by recent data, is proving a major challenge due to infrastructure challenges and technical difficulties, leading to shut-ins.
In addition to the above problems, there have also been instances of community or workers’ protests, which incessantly disrupted operations, leading to severe losses.

A document obtained by THISDAY showed that the Nigerian National Petroleum Corporation (NNPC) and its partners lost 6.035 million barrels of crude oil to emergency shutdowns in the previous month.
In its August presentation to the Federation Account Allocation Committee (FAAC), which was held between the 18th and 19th of August, the corporation recorded 32 such incidents throughout its facilities in the country.

A breakdown of the losses, according to the document, indicated that the highest combined shortage of 1.62 million barrels was from Qua Iboe, with 200,000 barrels due to production shut-in arising from flare management and low wellhead pressure.
Additional 530,000 barrels were lost to shut-ins on Qua Iboe following tank top concerns, 650,000 barrels as a result of production cut-back as directed by the Department of Petroleum Resources (DPR) as well as a loss of 240,000 barrels due to a gas leak on one of the assets.

This was followed by losses from the Forcados facility, which shed 200,000 barrels, 84,000 barrels, 30, 000 barrels, and 80,000 barrels respectively on different days, with reasons ranging from leak repairs, tank top issues, a fire incident, and declaration of a force majeure.

Forcados continued its shut-ins, shedding an additional 405,000 barrels of crude oil at the Uzere/Afisere/Kokori axis following a shutdown as a result of protests by community workers as well as a loss of 80, 000 barrels due to a fire incident.
In the same vein, Anyala Madu shed 105,000 barrels, Bonny suffered total shut-ins of 335,000 barrels, Ugo Ocha lost 30,000, Okono’s shutdown led to the loss of 96,000 barrels, while Sea Eagle lost 750,000 barrels.
Usan shed 585,000 barrels, Brass lost 200,000 barrels, Erha lost 230,000 barrels and Yoho lost a cumulative 280,000 barrels during the month.

Similarly, Agbami lost 630, 000 barrels during the month, Egina lost 70,000 barrels of crude, Pennington shed a total of 195, 000 barrels, while Ima posted a loss of 30,000 barrels in the month under review.
It’s unclear if the current challenges with Nigeria’s oil infrastructure will be resolved this September, but OPEC data showed that the country had already been allocated 1.614 barrels per day for the month.

Due to Nigeria’s inability to meet its quota, in addition to the challenges in Angola, OPEC produced about 10 per cent below its overall quota but kept output from its 13 members at about 27.11 million barrels a day in August.
But Iran, Venezuela, and Libya continue to be excluded from the OPEC production quota deal, which has led to steady stability in the oil market.

In April last year, OPEC and its allies were known as OPEC+ embarked on production cutbacks in a bid to rescue the global oil industry, which at some point hit the negative territory mainly due to the COVID-19 pandemic and the oil price war between Russia and Saudi Arabia.
If Nigeria, Angola, and other countries are unable to meet production due to a build-up of the technical problems resulting from years of investment constraints and market supply remains in a deficit, countries with spare production capacity, including Saudi Arabia, Iraq, and the United Arab Emirates may be called upon to make up for the shortfall.

OPEC+ had confirmed individual crude production quotas for the 19 countries participating in its ongoing output restraint deal after its September 1 agreement to a 400,000 bpd increase in its collective output.
Originally set to expire in April 2022, the OPEC+ group’s decision to extend the deal allows for more time to unwind the 5.8 million bpd that is still being withheld to be unwound more slowly.

Aside the Minister of State, Petroleum Resources, Chief Timipre Sylva, making a similar appeal when the OPEC Secretary-General, Dr. Sanusi Barkindo, visited him in his office recently, during last week’s meeting of the cartel, Nigeria reiterated its call for a baseline adjustment, which currently stands at 1.829 barrels per day, excluding condensates.