After Raising Recovery Hopes in January, Nigeria’s Oil Production Continues Downward Spiral in February, March

Emmanuel Addeh 

In spite of raising the hope of a gradual recovery from months of declining oil production in January this year, Nigeria again experienced a slump in the volume of the commodity drilled in February and March 2022, according to new data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Whereas in January there was excitement that Nigeria had begun to ramp up production when it hit about 1.4 million barrels per day, but in February, the NUPRC figures indicated that it reduced significantly to 1.257 million bpd and 1.237 million bpd in March.

Incidentally, the rise in January production coincided with the same month the federal government and its partners in the oil and gas industry recorded a huge slump in crude oil losses due to theft, sabotage and community issues.

THISDAY had reported that in January, the Nigerian National Petroleum Company (NNPC) Plc recorded a decrease to 2.2 million barrels of losses, a marked improvement on Nigeria’s perennial crude oil losses, which hit as high as 7.2 million barrels the previous month.

For over a year, Nigeria has been unable to meet the production quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC) due to losses to vandalism and outright sabotage as well as community issues.

The menace has further impacted on government institutions as well as individual operators who have recently raised the alarm over the humongous losses the nation and private entities are being subjected to.

But in addition to reduced oil production in the second and third months of this year, the NUPRC data showed that condensates production also decreased significantly.

The condensates production, the blended type, slumped from 74,231 barrels per day in February to 62,500bpd in March, while the unblended fell from 208,651 bpd in January to 191,541 bpd in February.

Furthermore, total liquids production for February fell to 42.6 million barrels when compared with 51.9 million barrels in January.

According to the upstream commission, in Nigeria, hydrocarbon is currently extracted from 323 developed fields located in both onshore and offshore terrains. 

These fields, it said, either contain crude oil, condensates or natural gas reservoirs and are connected to 265 production processing stations, after which the stabilised oil and gas are exported via 31 export terminals.

There were hopes that Nigeria had begun an upward swing in January when it recorded a substantial growth in its oil drilling activities, compared to the last quarter of 2021, with onshore production rising 12 per cent, while deepwater and shallow water activities increased by 5 per cent and 7 per cent respectively.

It was a marked improvement when put side by side the last quarter of 2021 when onshore production was down 36 per cent, deepwater 28 per cent and shallow water 20 per cent.

But in contrast, in January, according to a report by Renaissance Capital, a frontiers market investment bank, onshore production was only down 24 per cent , deepwater 23 per cent and shallow water 13 per cent.

However, even at the time, there were issues of sustainability of the new-found rhythm by the NNPC and its partners which have lagged behind for months in terms of meeting its allocated quota. “It is too early to say if these levels can be sustained,” a RenCap report noted in January.

Nigeria’s ageing infrastructure, downtime and crude theft are chronic challenges for the onshore sector as it has been unable to meet its OPEC cut which has now almost climbed to 1.8 million bpd.

Promises by the Minister of State, Mr. Timipre Sylva and the NNPC Group Managing Director, Mallam Mele Kyari, that the country would hit between 1.7 million bpd and 1.8 million bpd by the end of 2021 had remained largely unrealised.

The problem is further compounding by the halt in investment in fossil fuels by very environmentally conscious countries and International Oil Companies (IOCs), mostly in Europe and spearheaded by America.

“The recovery in January offers some optimism, we think, but the outlook remains uncertain,” Renaissance Capital had said.

In summarising the sector outlook, the RenCap analysts concluded: “However, in the absence of major project start-up visibility, even with moderate investments, we expect declines to take their toll on production.” 

 RenCap analysts noted that Nigeria’s oil sector challenges are exacerbated by a challenging operating environment, with issues such as local opposition, oil spills, militant activity, crude evacuation constraints and logistical bottlenecks.

 In addition, it had mentioned unattractive fiscal terms as one of the negative factors, stressing that Nigeria’s onshore fiscal terms are some of the least attractive globally.

Although the Petroleum Industry Act (PIA) has improved fiscal terms across all terrains, the report pointed out that “its implementation is slow and we have not seen yet a positive response from the sector.”

Furthermore, on Sunday, Sylva admitted that some security personnel deployed to fight oil theft were heavily involved in collaborating with those stealing the commodity in the Niger Delta.