Africa’s largest economy has seen a decline in its oil rig count for the first time in 2022.
Nigeria recorded a nine percent decrease month-on-month in August 2022, data obtained from the Organization of the Petroleum Exporting Countries (OPEC) have shown.
According to the OPEC data, the country’s oil rig, which depicts the level of oil production activities by operators, fell from 11 in July to 10 in August.
The rig count is largely a reflection of the level of exploration, development, and production activities occurring in the oil and gas sector.
So far in the year, the country has no new exploration acreage. According to Rystad Energy, Angola, Morocco, Egypt, and Zimbabwe are the only African countries to award new exploration acreage in 2022.
The Oslo-based energy think-tank said the licensed acreage in Africa shrank 70 percent to just 46,000 square kilometres, placing the decline in leasing activity on the drop in Russian acreage awards that fell by 90 percent from a year ago to 9,000 square kilometres.
“It is clear that oil and gas companies are unwilling to take on the increased risk associated with new exploration or exploration in environmentally or politically sensitive areas,” said Aatisha Mahajan, vice president of analysis, Rystad Energy.
She said that global exploration activity has been on a downward trend in recent years, even before the Covid-19 pandemic and oil market crash, and that looks set to continue this year and beyond.
Nigeria’s oil woes did not stop at the rigs and exploration as its output also dropped to the lowest in the year and in 32 years.
The country’s oil production fell by 112,000 barrels per day (bpd) to 972,000 bpd in August from 1.08 million bpd in July, based on direct communication. The largest economy in Africa sits behind Angola (1.18 million bpd) and Libya (1.12 million bpd), according to OPEC’s secondary sources.
Experts blamed the development on the country’s insecurity issues and the move towards greener energy.
“With the challenges of security, oil theft, decarbonisation efforts and the lack of assurance for drilled wells to produce and ensure delivery to export facilities, investor confidence has dropped over the years and further reflected in low rig counts in Nigeria,” said Etulan Adu, an oil and gas expert.
According to him, oil producers in the United States are increasing upstream activities gradually as they are taking advantage of the energy crisis caused by the invasion of Ukraine by Russia.
“But for Nigeria, we need to tackle the issues facing the industry to help in investments in upstream projects and drilling activities,” said Adu.
On the other hand, Oyinkepreye Orodu, head of department, Petroleum Engineering at Covenant University, said Nigeria could gauge the prospect of increase in future production and the level of current investment in the sector with the rig number.
“The oil rig number reflects or signifies ongoing exploration activities, and field development scenarios which may involve various well intervention schemes to boost production or drilling new infill wells to further improve oil recovery,” he said.