• Thursday, July 18, 2024
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BusinessDay

Nigeria’s oil production slumps to 1.25m bpd in May

Nigeria’s oil trades below $90 amid China’s economic concerns

Nigeria’s oil output witnessed a decline in May, dipping to 1.25 million barrels per day (mbpd), according to data from the Organisation of Petroleum Exporting Countries (OPEC).

This represents a drop from previous months, raising concerns about the nation’s oil production capacity.

The decline comes after a brief recovery period in April, where production rose to 1.28 mbpd after a slump in March.

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While OPEC, relying on information from Nigerian authorities, reports 1.25mbpd, secondary sources suggest a higher output of 1.42 mbpd in May. Regardless of the exact figure, a clear downward trend is undeniable.

The country’s low production has been attributed to massive crude oil theft in Nigeria’s oil-rich Niger Delta, ageing oil fields, poor crude oil terminal maintenance, shutdowns, and reduced investments in the upstream oil and gas sector.

The situation has led to significant revenue losses for the country.

“The federal government has sustained efforts to reinforce pipeline surveillance and clamp down on oil theft. However, results appear slow and inconsistent,” analysts at CSL research said.

Endemic oil theft and frequent sabotage of pipelines have been one of President Bola Tinubu’s biggest challenges in recent years, dampening government finances and limiting the country’s output and exports.

FDI in the sector fell to less than half a billion dollars in the first half of 2023, with the full-year figure unlikely to match a peak of $22.5 billion in 2019.

When an oil executive said Nigeria needed $25 billion per annum in investments to achieve a production target of 2 million barrels daily, the task at hand for Nigeria came into better perspective.

The 2010s witnessed a period of significant FDI from international companies eager to tap into the country’s vast oil and gas reserves as the future for Nigeria’s nascent indigenous upstream oil and gas industry looked bright, almost dazzlingly so.

In 2014, Nigeria attracted the largest amount of FDI of any African country, with inflows exceeding $22.1 billion. This influx of capital fueled major projects, including deepwater exploration and development of new oil fields.

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Oil was selling for more than $100 a barrel, as much as twice the production costs in Nigeria’s trickiest deepwater fields and several multiples of those in its shallow water and onshore fields.

Nigeria’s oil rigs, which depicts the level of oil fields averaged 35 rig counts in 2014, a development that translated to increased crude production as Nigeria’s output averaged 2.2 million barrels per day.

In August 2014 “the perfect storm of collapsing oil prices” arrived, said Carlos Hardenberg, lead portfolio manager of Templeton Emerging Markets Investment Trust. The naira fell, investors fled and Niger Delta militants who wanted a greater share of the country’s energy wealth struck.

Little has changed since then.

The country’s appeal had been tarnished by security problems that have only worsened since.