NNPC’s crude lifting drops 57 million barrels in 2015

A low price regime amongst other factors has led Nigeria’s share of crude oil lifted to decline by about 57 million barrels in 2015 from the corresponding period a year earlier.

According to data from the Nigerian National Petroleum Corporation (NNPC), the state oil company’s crude lifting declined from  344,885,197 barrels from January to November, 2014 to 287,401,985 barrels over the same period in 2015. The quantity of crude oil lifted by the NNPC represents 40.7 percent of the total Nigerian crude lifted in 2015, a slide of about 7 percent when compared to the 47.2 percent it lifted in 2014.

Nigeria’s share of crude oil lifting was captured under the NNPC JV/Profit oil, Tax oil (FIRS) and Royalty oil (DPR) headings.

Meanwhile, International Oil companies (IOCs) and other oil firms operating in the country lifted 59.3 percent of Nigerian crude over the same period in 2015, which equates to about 418,840,511.40 barrels. Compared to 2014, Nigerian crude lifted by these companies increased by 33 million barrels against the 385 million barrels they lifted in 2014.

“Because of low oil price, the quantity of crude oil required for the cost oil in the production sharing contract (PSC) is bound to rise. This constitutes a significant component of lifted crude for international companies”, said Wumi Iledare, professor of energy economics at Emerald Energy Institute, University of Port Harcourt.

In addition to the low price regime, Africa’s number one crude oil producer receives neither royalty nor profit on oil from deep water projects in excess of 1,000 metres water depth.

“In deep water greater than 1,000 meters, Nigeria receives no royalty and no profit on oil yet, so more production from these assets means less oil for NNPC to lift. In addition, production from joint venture (JV) assets is decreasing, while production from PSC assets in deep water is rising in favour of the IOCs”, Iledare said.

“The implications include what you see with the slump in foreign reserves and its impact on forex, which has translated to volatility in exchange rates”, he added.

The situation according the professor of energy economics “is a triple jeopardy; low oil price, poor marketed production due to low global economic growth, and high exchange rate for a petroleum dependent economy which translates to a disaster in waiting.

“There is no immediate fix but the short run solution is cost management with immediate diversification of government sources of revenue”, he said.

“This trend is worrisome going forward.  The logical implication of lower year-on-year oil lifting by NNPC is revenue reduction for Nigeria. This becomes an issue if you remember that oil sold at record high prices for the first half of 2014 averaged $99.03/bbl. while it sold for an average $52.35/bbl. for 2015”, said Chijioke Mama, an energy research analyst and syndicated columnist.

A total of 706,242,496 barrels of Nigerian crude oil was lifted between January and November 2015, a shortfall of 24,477,718 barrels or 3.34 percent from the 730,720,214 barrels lifted over the same period in 2014.

Over the 11-month period, NNPC data also revealed that Nigeria’s total crude oil production output declined from 729,333,181 barrels for 2014 to 708,183,647.80 barrels in 2015, a 2.8 percent slide.

“In low oil prices and a gloomy economy, unplanned production decline for Nigeria is not good news, especially when OPEC has not reached a consensus on lowering member’s allocated quotas”, Mama said.

There are many factors affecting production dynamics, according to Iledare.  “Perhaps the most prominent is insecurity of assets in the Niger Delta. Also, JV assets are maturing and new wells and infield development programmes are not measuring up to fill in the gaps. On top of all this, are the fundamentals of demand and supply in terms of marketed production; high inventory of supply necessarily demands for shut down of wells”, he said.

FRANK UZUEGBUNAM