U.S. domestic crude oil production exceeded imports for the first time in 16 years, a government report released last week showed, putting more pressure on Nigeria to reform its oil industry and diversify its economy.
The U.S. pumped 7.3 million barrels a day of oil last week, up 8,000 barrels from the prior week, the EIA said in its Weekly Petroleum Status Report. Imports fell 549,000 barrels a day last week to 7.27 million.
Nigeria by comparison pumped 1.87 million barrels a day in May, the same as Angola, according to data compiled by Bloomberg.
For Nigeria, in which oil revenues accounts for 70 percent of the Federal Government budget and 90 percent of the nation’s dollar earnings, the stakes could not be higher.
The country’s oil revenue dynamics this year look relatively less supportive than in 2012 “given that the oil price and production have declined lately,” says Samir Gadio, an emerging markets strategist at Standard Bank, London, in a response to questions.
“Industry experts expect production to remain under pressure in coming months amid continued leakages and bunkering.”
The surge in oil and gas production helped the U.S. meet 88 percent of its own energy needs in February, EIA data show.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Oklahoma and Texas.
“It is a concern,” petroleum minister, Diezani Alison-Madueke, said after OPEC countries decided to keep their production target unchanged at a meeting in Vienna last week and raised a committee.
The committee will consider the effect of shale oil on the global market for OPEC crude “in the not too distant future,” she said.
Increased U.S. production has particularly affected imports from Africa, which typically produce lighter grades of oil similar to the North American blends.
Imports to the U.S. from Nigeria tumbled to a record low in February, based on EIA data. The amount spent on U.S. petroleum imports fell to $29.6 billion in April, the lowest level since November 2010, the Commerce Department reported last Wednesday.
Crude futures for July delivery gained 43 cents, or 0.5 percent, to settle at $93.74 a barrel on the New York Mercantile Exchange.
Nigeria’s benchmark Bonny light crude, is down 7.64 percent since February; it reached a low of $100.31 on April 17.
The uncertainty caused by the Petroleum Industry Bill (PIB), currently before the nation’s parliament has been blamed for the fall off in investment needed to reform the industry and boost oil production in Nigeria.
Analysts estimate investment of at least $28 billion has been lost or deferred since 2010 as a result, with the beneficiaries being other producers in the sub-region such as Angola and Ghana.
The 200-plus page PIB plans to partly privatise and list Nigerian National Petroleum Corporation (NNPC), tax oil company profits at up to 50 percent for deep offshore, and give the oil minister supervisory powers over all institutions in the industry.
The bill, however, fails to address most of the necessary reforms needed in the sector and may already be outdated as it fails to come to terms with the current happenings in the industry such as the US shale gas revolutions, an industry stakeholder tells BusinessDay.
“Unless there is any meaningful progress in terms of structural fiscal reforms, Nigeria will remain vulnerable to long-run oil boom and bust cycles,” Gadio tells BusinessDay.