Nigeria, Africa’s largest economy saw its crude oil production spiral by 23 percent from 2020 to 2022, the latest data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed.
Data from the upstream regulatory body shows that the country’s oil production averaged 1.49 million barrels per day (bpd) in 2020, 1.31 million bpd in 2021 and 1.14 million barrels per day in 2022.
Analysts say the struggle to pump enough oil is on the back of oil theft, which results in production shut-ins, and the divestment of International Oil Companies (IOC) from onshore and offshore assets in Nigeria.
Etulan Adu, an oil and gas production engineer pinned the decline in oil production on oil theft, underinvestment, insecurity, poor maintenance, and energy transition.
“Nigeria’s oil production fell due to underinvestment in upstream exploration and production, insecurity in the country which impacted foreign investors, and crude oil theft and pipeline vandalism,” he said.
“Other issues include divestment of marginal fields by IOCs which indigenous companies have not scaled up production, poor maintenance and ageing infrastructure of most marginal fields, and delays in the passage of the Petroleum Industry Act (PIA).”
Other experts say rampant crude theft and uncertain fiscal and regulatory frameworks have stalled investments in the sector.
They say investments have crippled production and the country does not look attractive for investors, especially multinationals who are seeing better opportunities elsewhere.
International vessels enter Nigerian waters and in connivance with state oil, firms and security officials reportedly steal large volumes of crude, according to BusinessDay checks.
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Africa’s largest economy has also been struggling to improve its oil output to reach its Organization of the Petroleum Exporting Countries (OPEC) quota.
According to the data from the upstream regulatory body, 2022 had the lowest production of oil as the country saw its oil output dip below 1 million bpd in August and September.
In 2022, Nigeria lost its status to Angola as the largest oil producer for six months straight due to rampant crude oil theft, according to OPEC.
Last year, the Nigerian National Petroleum Company (NNPC) Limited uncovered an illegal four-kilometre pipeline from Forcados in Delta state to the sea and a loading port that was part of an elaborate crude theft operation for the last nine years.
Data from the National Bureau of Statistics (NBS) showed foreign investment inflows into Nigeria’s oil and gas sector dropped by multiple folds.
Foreign investment inflows into the oil and gas industry, which stood at $200m in the second quarter of 2016, have declined to $1.9 million in the corresponding period of 2022, indicating a 99 percent drop.
Analysts that discussed with BusinessDay have attributed the decline in production to insecurity, a hostile regulatory environment and poor fiscal policies.
Local producers have been hamstrung while multinationals are fleeing the onshore fields in the Niger Delta.
Jide Pratt, an energy analyst exposed to Nigeria’s energy sector, said although the PIA set the tone for more investment in the industry with reference to the upstream sector, litigation seemed to have taken over the transfer or sale of some assets that could add value to the country’s production.
According to Adu, another reason for the decline in Nigeria’s oil output is the global energy transition from fossil fuels to cleaner energy.
“As the world pivots to low-carbon energy sources, financing oil and gas projects by top western banks has become a concern in countries with challenging carbon footprint in terms of their oil and gas operations,” he said.
For Ayodele Oni, energy lawyer and partner at Bloomfield Law Practice, divestment, heightened security issues in the country, the presence of illegal modular refineries for the refining of illegally obtained crude oil products, and a lack of regulatory certainty, amongst others, have shackled the government’s effort to significantly turn things around.
Last year, Mele Kyari, group chief executive officer, NNPC testified that though oil theft in Nigeria has been on for over 22 years, the rate it has assumed in recent times is unprecedented.