Nigeria’s Crude Oil Underproduction Losses Hit N6.8tn in Seven Months

Emmanuel Addeh in Abuja

Nigeria’s inability to ramp up production to meet the Organisation of Petroleum Exporting Countries (OPEC) output quota cost the country a gross loss of about N6.8 trillion in the first seven months of 2023, THISDAY analysis of available industry data has revealed.

While total oil production shortfall was approximately 113.52 million barrels between January and July, the data showed that the country failed to rake in an estimated $9 billion, at an average oil price of $80 per barrel during the period.

As at the time filing this report, the naira closed to the dollar at N747 at the official window. OPEC’s production allocated to Nigeria during the period was 1.742 million barrels per day.

The latest data on Nigeria’s total production volume from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), showed that Nigeria’s output fell to a three-month low in July.

On Sunday, THISDAY exclusively reported that the country’s crude production shrank to 1.081 million barrels per day in July, from 1.25 million barrels per day in June, on the back of persisting crude oil theft and a leak at the Forcados terminal in the Niger Delta during the month.

It indicated that if the month of April, which hitherto had the lowest output for 2023 is discounted, the production for July would emerge the lowest for this year so far.

With the low volume of oil drilled in July, it meant that Nigeria failed to produce as much as 661,000 barrels per day and a whopping 19.8 million barrels during the entire month.

Whereas the situation was already bad, the suspension of production by Shell Petroleum Development Company (SPDC) at Nigeria’s Forcados crude oil terminal mid-July, due to a leak at the export terminal, dashed the hope of the country’s expected gradual production recovery.

The significant output shrinkage below the target set for the country by OPEC in the first seven months of 2023, showed that Nigeria has only struggled to do a production of just about 63.3 per cent of total projected output during the period.

The review indicated that whereas the country was expected to drill an estimated 365.82 million barrels during the period, given the 1.742 million daily OPEC production quotas, it only managed to produce 252.3 million barrels. This left the country with an estimated 113.52 million barrels deficit.

It also meant that the nation was unable to produce about 36.7 per cent of OPEC’s output forecast for the period, a continuation of the production shortfall which became pronounced since mid 2020 in the aftermath of the Covid-19 pandemic.

Nigeria is at the moment, desperately in need of foreign exchange as currently reflected in the weakening value of the naira to the dollar and inability of a number of foreign investors to repatriate funds to their countries of origin. The naira currently sells for over N900/$ in the parallel FX market.

OPEC earlier 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. Nigeria gets over 90 per cent of its foreign exchange earnings from the export of the commodity.

But according to the NUPRC data, in all, out of the over 52.26 million barrels expected monthly volume of oil output, the country’s production 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 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 while in June; it struggled to raise production to 37.4 million barrels for the entire month. For July, output fell to 33.5 million barrels.

This year, the key assumptions in the country’s 2023 budget include an oil price benchmark of $75 per barrel; exchange rate of N435.57 per dollar; oil production of 1.69 million barrels per day and inflation rate of 17.16 per cent.

Production from most of the terminals continued to struggle last month, according to the NUPRC data, with crude oil volumes from Bonny slumping from 2.7 million barrels to 2.2 million barrels during the period.

But the biggest culprit was Forcados where output slumped by over 4 million barrels from 7 million barrels to 2.8 million barrels, due to a leak that was observed.

However, there was cheering news from Qua Iboe which rose from 3.7 million barrels in June to over 4 million barrels in July, while production at the Escravos terminal also increased marginally from 4.4 million barrels to 4.7 million barrels between June and July.

At the Odudu terminal, production was curtailed from 3.1 million barrels to 2.9 million, while output from Tulja-Okwuibome remained stagnant at 1 million for June and July.  Bonga added about 100,000 barrels for the month to hit 3.8 million barrels. Egina also grew from 2.7 million barrels to 2.9 million barrels during the month.

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. These developments have hobbled oil production in the country.

The Nigerian National Petroleum Company Limited (NNPC), the ministry of petroleum, the regulatory agency and other stakeholders in the sector have at various times shifted the timelines to meet OPEC production quota. None of the timelines have so far been met.