Nigeria oil production rebounds to 2.15 mbpd in June

Nigeria’s crude oil production rose by 200,000 barrels a day to 2.15 million in June, a Bloomberg survey of Organisation of Petroleum Exporting Countries (OPEC) producers showed.

The gain in Nigeria was the second-biggest in the survey and the highest output since September.  Figures for Africa’s biggest producer are volatile because of unrest and theft in the Niger River delta, the main oil-producing region.
Production by the 12-member
OPEC rose by 278,000 barrels a day to 30.223 million, according to the survey of oil companies, producers and analysts.

OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group next meets on Nov. 27.

Oil prices have remained elevated as output dipped by over 400,000 barrels a day in Iraq, due to turmoil in the country.

Brent crude for August settlement dropped 94 cents, or 0.8 percent on Monday, to close at $112.36 a barrel on the London-based ICE Futures Europe exchange.

Brent, the benchmark for more than half the world’s oil, reached $115.71 on June 19, the highest level since Sept. 9.

The oil and gas industry accounts for 75 percent of the Nigerian government’s revenue and up to 95 percent of dollar earnings.

The Central Bank of Nigeria gross foreign currency reserves rose by $200 million to $37.2 billion last week and may continue its accretion if oil prices remain elevated on the back of turmoil in Iraq brought about by the ISIL militants.

The increase in oil production is rare for Nigeria which has struggled to boost production amid militant attacks on oil infrastructure and lack of reforms.

Nigeria has the potential to double crude production to 5 million b/d but is held back by a lack of reforms in the oil and gas sector, say analysts.

Reforms such as passing the Petroleum Industry Bill (PIB), scrapping fuel subsidies, as well as improving security and rule of law, are seen by analysts as steps that could help get the
sector to soar.

“Nigeria won’t achieve a substantial increase in production until it passes the long-delayed Petroleum Industry Bill,” Ravi Bhatia, an analyst at Standard & Poor’s (S&P), said in a recent interview.

The challenge of diminishing domestic production available for export could also be a catalyst for transforming the Nigerian oil sector, if steps are taken to raise domestic oil production by optimising performance at mature fields and scaling up offshore operations, say analysts.

Measures should also be aimed at reducing oil theft, they say.

Nigeria lost $7 billion in revenue in 2011 to oil theft, about a quarter of this year’s national budget, according to the central bank.

Drilling activity has materially declined in Nigeria in the past decade, compared with previous decades, falling to just over 20 exploration and appraisal wells per year, having peaked at over 200 wells during the 1970s, according to data from Wood Mackenzie.

Regulatory incentives to stimulate new investments, such as bringing natural gas into the Nigerian energy equation to reduce oil use in the domestic economy and promoting the development of the domestic gas sector, would help increase the amount of oil that can be sold on international markets at a higher profit.

“Companies’ ability to sell gas on commercial terms should increase the value of developing oil reserves, thus providing an additional stimulus for investment into the upstream sector,” said Ildar Davletshin, an oil and gas analyst at Renaissance Capital.

PATRICK ATUANYA