Nigeria’s Rising Oil Output and Surveillance Activities in N’Delta

With the ongoing tortuous battle against oil theft and pipeline vandalism in the Niger Delta, there appears to be a ray of hope with what now looks like a steady increase in crude oil production in the last few months, writes Emmanuel Addeh.

Oil theft and pipeline vandalism have existed in Nigeria for years, but in recent times, the problem has taken such mindboggling proportions, with Nigeria’s crude oil production slumping to as low as 900,000 barrels per day around September last year.

It had become so deep-seated a challenge, that beyond its negative economic impact and national security implications, the international oil companies operating in the country for more than six decades started to exit Nigeria.

The country is not out of the woods yet, but it would seem that there is some hope in the horizon and some light at the end of the proverbial tunnel, given the jump in volume drilled and its attendant revenue implication for the federation.

The sheer volume of crude oil lost to non-state actors and the manner the situation has disrupted the nation’s economy, will be a discussion for another time, but suffice to say that official security arrangement failed to curb the menace markedly. This resulted in the federal government seeking alternative solutions.

Before now, several layers of security arrangements and special units had been set up by the federal government under various names, but the problem had, as it were, not been resolved.

Those who wear the shoe were feeling the pains. Industry players cried out, government gave assurances, Nigeria’s main source of foreign exchange was drying up, dwarfing government revenues even as it took a toll on the environment.

While oil-producing nations were boosting their foreign reserves and National Oil Companies (NOCs) were declaring massive profits and bonuses, Nigeria, ironically, remained in the doldrums because it was under-producing.

So, when it became public knowledge that the Nigerian National Petroleum Company Limited (NNPC), had facilitated the signing of back channel contracts for the protection of the pipelines and other assets, it was received with mixed reactions.

A year later, there appears to be some justification for that decision, given that Nigeria recently produced its highest volume of crude oil since January 2022, that is a period of 21 months.

 Although, there are still considerable activities by vandals and oil thieves, there has been some significant improvements, which can be justifiably tied to the pipeline surveillance and protection agreements signed with the local security groups.

There had been fluctuations before now, but for the past three months, the crude volume output has been steady and consistent, a sign that things have probably begun to look up.

According to data from the Organisation of Petroleum Exporting Countries (OPEC), increased crude production by Iran, Nigeria and Iraq, inspired a boost in the August production.

The oil production from the 13 members of the organisation, OPEC, averaged 27.45 million barrels per day for that month, higher by 113,000 bpd on a month-on-month basis.

While Nigeria’s crude oil production climbed to 1.269 million barrels per day, from 1.171 million in July 2023, quoting secondary sources, the cartel however pegged the figure for direct communication at 1.181 million barrels per day, from 1.081 million bpd in July 2023.

In the same vein, Nigeria’s crude oil production improved in September, this time rising by a volume of roughly 165,429 bpd during the month under consideration.

While the current production allocation given to Nigeria by the international producers’ group still remains 1.74 million barrels per day, the information from the petroleum industry regulator showed that Nigeria was able to drill 1.34 million bpd in September.

It will be the country’s highest self-reported crude oil output since January 2022 when Nigeria managed to produce 1.39 million bpd. The lowest production for that year was just above 900,000 bpd.

As expected, much of Nigeria’s increase came from Forcados terminal which resumed production recently after loadings of the medium sweet grade were suspended because of a potential leak at the export terminal.

The terminal which has the capacity to produce between 250,000 bpd and 400,000 bpd is operated by Shell Petroleum Development Company Limited  (SPDC). Production on the terminal rose from 3.7 million in August to 7.4 million in September, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) data.

The volume of crude oil drilled from Yoho also rose marginally from 901,163  to 926,264 during the month.

However, when condensates which are outside OPEC’s computation were added, the country produced 1.57 million bpd in September. In all, during that month, Nigeria produced 40.3 million barrels of oil, a cheery development that hadn’t happened in a long time.

After August and September, Nigeria again ramped up crude oil production in October, to boost the output by the OPEC for the month.

Although the NUPRC figures for the month were yet to be released at the time of this report, according to a survey by Reuters which uses shipping data , Nigeria increased exports in October without any major disruption to shipments, increasing output by 50,000 bpd. The trend is likely to continue.

The country is targeting a further recovery by next year even as oil output has risen for a third straight month. The 50, 000 bpd rise would be about 1.5 million additional barrels for that month and roughly and about $135 million in hard currency, given a $90/barrel price.

So, the implication of the rising output if sustained, is that Nigeria would soon have the need to reduce its external borrowing which has weighed heavily on the resources of the country as increased production will boost dollar inflow . It will also help stabilise the FX market in Nigeria.

Apart from that, Nigeria which gets over 90 per cent of its FX earnings from the export of crude oil, will also have adequate volumes for sale to local refining facilities, especially the Dangote refinery which is expected to come on stream before the end of the year. For everyone, this is therefore a win-win situation.

With the rising hope of more oil production in the Niger Delta, investors are appearing to have renewed hope in the country.

The federal government recently announced that it had secured a $13.5 billion investment commitment from the International Oil Companies (IOCs) as well as independent operators to boost the country’s crude output in the next 12 months.

The Special Adviser to the President on Energy, Mrs. Olu Verheijen, in a statement, said the partnership was carried out alongside the NUPRC.

Verheijen pointed out that the conclusions were arrived at after a detailed review process by NUPRC and  her office, alongside major operators like Chevron, Total, Shell, NAOC, Exxon Mobil, Seplat, Heirs Holdings, Waltersmith, First E&P, among others.

A key objective of the discussions, she said, was to advance a presidential initiative aimed at addressing the nation’s revenue emergency whilst contributing to stabilising Nigeria’s economy.

“Results of these talks disclosed significant investment opportunities with an estimated $55.2 billion in investments projected by 2030, of which $13.5 billion is expected to be invested by these companies within 12 months from now.

“Collectively, they also pinpointed key strategies that will ensure the delivery of 2.1 million barrels per day by December 2024, positioning Nigeria well ahead of President Bola Tinubu’s campaign promise of the 2.6 million barrels by 2027,” Verheijen stated.

While it was learnt that the process of renewal is ongoing, there might be need to expedite it to ensure that work does not stop and that the gains recorded are not rolled back.

There have also been cacophony of voices which have spoken in favour of the need to hasten the renewal of the contracts.

For instance, the Special Adviser to the Governor on Niger Delta Affairs, Chief Gritson Omatsuli who recently spoke at a news conference in Warri, Delta State, said the renewal of the ones that were still pending would deepen the prevention of pipeline vandalism and other criminal activities that might disrupt oil and gas production.

He described those calling for the cancellation of the pipelines surveillance services contract as “enemies of the country.”

Also, a community leader in the Niger Delta region, Sir Matthew ltsekure,  has, advised President Bola Tinubu to direct the management of the NNPC to renew the contract for pipeline surveillance in the area.

According to Itsekure in a statement in Warri , this is the only way to check oil theft and vandalism and shore up the country’s daily crude production.

“The renewal of the pipeline surveillance contract will enhance and sustain the already growing production quantum of crude to meet our target allocation as their activities are effectively frustrating illegal oil bunkering activities that were the norm in the area,” he stated.