Nigeria’s Rigs Count Remains Stunted as Oil Sector Investments Wane

Emmanuel Addeh

With investment waning and oil production declining, Nigeria’s overall oilrigs count, which generally mirrors the measure of activities in the upstream sector, has continued to stagnate, a THISDAY analysis has shown.

As reflected in the latest Monthly Oil Market Report (MOMR) released by the Organisation of Petroleum Exporting Countries (OPEC), Nigeria, Africa’s biggest oil producer, has not markedly expanded its capacity in the last few years.

Instead, while there are assurances from the Nigerian National Petroleum Company Limited, (NNPC) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that they are “doing everything” to ramp up production, the number of oil rigs tell a different story.

In all Nigeria’s share of the global rig count as of April, according to the data released in May, has become insignificant, remaining at just 11 of the world’s total of 1,735 and OPEC’s total count of 390.

With over 37 billion barrels of crude oil in reserves and roughly 2 per cent annual production as well as an estimated 50-year total life, if there are no new discoveries, Nigeria remains one of the most significant oil producers globally at 15^th position.

But while the country’s oil rigs only increased by one, to 11, from the 10 in March, it showed a sharp decline from, for instance, 2019, when it was 16 on the average.

The data showed that in April, Algeria, a lesser oil-producing nation had 28 oil rigs in total, while Angola’s was six and Libya, even with its current civil disturbances had seven.

Of the 1,735 rigs count globally, according to OPEC, 1,379 are oil, 328 are for gas while 28 are classified as others. OPEC has 13 members of which at least two are not currently being rated due to political problems in their countries.

To put it in context, non-OPEC countries such as the United States, the data showed, had 694 rigs while Canada had 103, both far higher than the entire Africa’s count of 55 for April this year.

Generally, in the oil industry, higher oil prices, like what currently obtains, mean higher rig counts, which also mean higher production. In the opposite direction, lower prices mean less rigs and falling production. However, Nigeria currently lacks capacity to ramp up production.

Aside the positive correlation between number of rigs and oil production, there are also many jobs attached to rigs when they are operational, meaning less rigs, less jobs in the oil sector.

However, although Nigeria failed to meet its production quota, its rig counts increased by two, from eight to 10 in March, but it was an average of five in Q2 2021, 10 in Q3 and seven in Q4 of the same year, but fell to eight in Q1, 2022.

Recently, a THISDAY’s analysis showed that Nigeria is producing far less oil than it did 25 years ago when the estimated population was much less than what it is today and government spending was far below what it is in 2022.

A comparison of the country’s average oil production per day in 1997, as indicated in the NNPC’s yearly statistical bulletin, showed that while Nigeria pumped 2.344 million barrels per day, plus condensates over two and a half decades ago, it can hardly produce 1.4 million as of this year.

Furthermore, while 26 rigs were in operation, on both onshore and offshore terrains, in 1997, Nigeria at present has just 11 active oilrigs, with a number of them not even in use.

 In addition, Nigeria’s count fell from 11 in September to nine in October 2021, according to data released by OPEC and got worse after Nigeria began shutting down many of its offshore platforms as oil prices took a downward slope and the producers’ group embarked on production curbs to stabilise the market.

A random historic rig count assessment earlier obtained by THISDAY showed that for instance, in the month of May, 2020, the country’s producing oil rigs fell from 16 to eight and two months later, in July, it fell further to six.

In January 2021, only six rigs produced while in February, it was seven; in March, it fell to six again, while in April 2021, total rig count was just five.

Nigeria has been struggling for over a year with meeting the quota allocated to it by OPEC due to ageing infrastructure as a result of years of under-investment in the upstream of the oil and gas sector. 

Added to these are vandalism and sabotage, technical issues as well as difficulties with restarting oil wells the country shut down last year in the heat of the Covid-19 pandemic.

Nigeria’s prospects in the sector remain uncertain, with deteriorating infrastructure that have seen all of its key export grades, including Agbami, Bonny Light, Forcados and Qua Iboe face severe production issues in the last year.

A recent document released by the upstream commission showed that although Nigeria’s rigs could be as many as 53 , only 12 have been near active in the last few months, while 25 are on standby and 16 have been “stacked” (may or may not be operable).

In terms of terrain, of the 53 rigs, 33 are onshore, 11 are offshore while nine are found in the swamps.

With big oil companies planning to embrace renewables, the challenge of getting the needed investment in a country like Nigeria which is rated low on its business friendliness may become even more difficult coming years.