Nigeria’s OPEC Oil Production Shortfall Hits 80m Barrels, 44% in Five Months

Emmanuel Addeh in Abuja

Nigeria’s oil production continued to fall below the target set for it by the Organisation of Petroleum Exporting Countries (OPEC) in the first five months of 2023, leading to a production of just 56 per cent of total expected output during the period, data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has revealed.

THISDAY analysis of the data revealed that whereas the country was expected to produce an estimated 261.3 million barrels during the period, given a 1.742 million daily production quota and about 52.26 million barrels every month, Nigeria’s total volume between January and May 2023, was 181.5 million barrels.

The slump in production, which had become more pronounced since 2020, left a deficit of 80 million barrels of crude oil not produced during the period.

In monetary terms, at a conservative oil price of $70 to a barrel during the period, it means that Nigeria, between January and May, 2023 lost a whopping gross sum of $5.6 billion due to underproduction of its crude oil quota.

In percentages, Nigeria was unable to produce about 44 per cent of its OPEC quota allocation during the period under consideration.

A few weeks ago, the international oil cartel slashed Nigeria’s production baseline to 1.38 million barrels per day for 2024 due to the prolonged inability of the country to consistently meet its quota for the commodity.

The decision of the Saudi-led coalition, which was accepted by the Nigerian delegation to the OPEC meeting in Vienna, came as a shock to many close watchers of the industry in the country.

It is also believed that the decision does not bode well for a country, which gets over 90 per cent of its foreign exchange earnings from the export of the commodity.

This year, Nigeria’s benchmark oil production in the budget is 1.69 million bpd, with a $75 price per barrel. However, while market forces and OPEC’s stabilisation policies have helped to keep prices around the expected benchmark, Nigeria’s production has been lagging behind.

In all, out of the over 52 million barrels expected monthly volume, the country’s output was 39 million barrels in January, 36.5 million barrels in February and 39.3 million barrels in March.

April was the most-hit in terms of the low volume of oil drilled, with Nigeria only able to produce 29.95 million barrels out of the over 52.3 million barrels expected cumulative production for the month. In May, the country produced 36.69 million barrels to continue the country’s deficit run.

Recall that in April, after a period of seeming respite in terms of ramping up of drilling activities, Nigeria’s crude oil production fell to a seven-month low of 998,602 barrels per day, a blow to recent modest gains made from the renewed efforts by the federal government to tackle oil theft and pipeline vandalism in the Niger Delta.

The depleted production figure for April was partly connected with the shutting down of oil platforms and declaration of force majeure by Exxon Mobil in Nigeria mid April, especially at the Qua Iboe asset.

On January 3, President Muhammadu Buhari signed the N21.83 trillion 2023 Appropriation Bill into law, the largest in Nigeria’s budget in history. It was based on a N10.49 trillion revenue, N12.1 trillion deficit and N6.31 trillion estimate for debt servicing.

From the total revenue of N10.49 trillion, independent revenue had the highest share of N2.62 trillion, non-oil revenue had N2.43 trillion, while N2.23 trillion was expected from oil revenue.

The key assumptions included an oil price benchmark of $75 per barrel; exchange rate at N435.57 per dollar; oil production of 1.69 million barrels per day and inflation rate of 17.16 per cent. Inflation is currently over 22 per cent, while the exchange is over $750. The budget deficit may widen if oil production does not improve markedly.

Nigeria’s continuing underproduction last month, was despite Qua Iboe growing from a slump of 1.9 million barrels in April to 4 million barrels in May while production at the Bonny terminal rose from 2.2 million barrels to 2.9 million barrels.

But in spite the shortfall in OPEC production quota, the NUPRC data showed that Nigeria’s crude oil output grew by 185,000 barrels per day, to hit 1.183 million barrels daily output in May this year.

It also saw output (crude and condensate) from Nigeria’s problematic Trans-Niger Pipeline (TNP) increase considerably during the month from 3 million barrels to 3.7 million barrels.

While overall, oil production output grew 18.53 per cent compared to April 2023 when it fell to 998,602 bpd, total liquids in May was largely boosted by the increased flow through the TNP line which jumped 24 per cent.

Although total self-reported drilling by the NUPRC stood at 1.183 million barrels per day, but when condensate, which is excluded from OPEC computation is added, the data highlighted that output rose from 1.245 million bpd in April 2023, to 1.427 million bpd last month.

However, despite the over 18 per cent additional output in May, Nigeria’s expected crude oil volume was still a far cry from  the 1.742 million bpd allocated to the country by the international oil cartel.

Beside other several challenges, Nigeria has had to battle the menace of oil theft and pipeline vandalism as well as waning investment in the oil sector, in the last few years, developments which have hobbled oil production in the country.

Despite the low production, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), Mele Kyari, earlier in the month, insisted that by July 2023, Nigeria’s crude oil production will reach 1.8 million barrels per day and 2 million barrels per day by December 2023.

He said: “The budget of this country is based on the cumulative production of our crude oil and condensates. Mind you, sometimes, these condensates are more expensive than the crude oil, so it’s the total liquids we are dealing with.

“The total number of liquids as of today is up to 1.6 million barrels per day. We have a line of sight, by the end of July, we will hit 1.8 million barrels per day, and we will hit 2 million barrels per day by the end of December.”