BY BAMIDELE FAMOOFO
For the first time in 2023, Nigeria’s daily crude oil production stays lower than its technical allowable capacity of 2.5 million barrels per day by about 1 million barrels per day, signaling the most insufficient capacity since September 2022 (940,000 barrels).
The decline in oil production is a major challenge for Nigeria’s economy, as crude oil remains the country’s main source of revenue and foreign exchange earnings.
Meanwhile, it is pertinent to note that a decline in production will have a negative impact on the government’s finances.
Nigeria’s daily crude oil production has averaged 1.21 million barrels per day (bpd) so far in 2023, despite the uncertainty and other forms of sabotage and vandalism that have befallen the sector.
According to the Nigerian Upstream Petroleum Regulatory Commission, Nigeria’s crude oil production declined by 21.3 percent month on month to 998,602 daily barrels in April 2023, from 1.2 million barrels reported in March 2023.
Analysts at Cowry Asset Management Limited, in a report, noted that the future of Nigeria’s oil industry looks uncertain as the country faces several challenges, including sabotage, pipeline vandalism, technical issues, and the shift to renewable energy, “but it is possible that the daily crude oil production in Nigeria may have changed since my knowledge cutoff date.”
“We should note that daily crude oil production can vary depending on various factors, such as maintenance schedules, pipeline disruptions, and production quotas set by organizations such as OPEC.
“According to the Nigerian Upstream Petroleum Regulatory Commission, Nigeria’s crude oil production declined by 21.3 percent month on month to 998,602 daily barrels in April 2023, from 1.2 million barrels reported in March 2023”
“In the case of Nigeria, her oil infrastructure is under constant attack from saboteurs and pipeline vandals. In April, there were a number of attacks on oil pipelines, which resulted in a loss of production. For example, the Nembe Creek Trunk Line (NCTL) was attacked on April 1, 2023, and the Trans Niger Pipeline (TNP) was attacked on April 15, 2023. These attacks resulted in the loss of about 200,000 barrels per day of production,” NUPRC lamented.
The Agency disclosed further that a number of technical issues affected production in April, including problems with wells and equipment.
For example, the Bonga field, which produces about 200,000 barrels per day, was shut down for maintenance in April. The global shift to renewable energy is also putting pressure on Nigeria’s oil industry.
As more and more countries move away from fossil fuels, demand for oil is declining.
For example, the European Union has pledged to be carbon neutral by 2050, and this will likely lead to a decline in demand for Nigerian oil.
Oil price oscillation in the global oil market is subject to fluctuations and uncertainties, and various factors such as supply and demand, geopolitical tensions, and technological advancements have impacted oil production and prices.
However, the Nigerian government is taking steps to address these challenges facing the oil industry, but it is unclear how successful these measures will be in a bid for Nigeria to maintain its position as a major oil producer.
Cowry Research, however, believes that the geopolitical unrest in the Middle East and North Africa could bring about a disruption in global oil supplies and lead to higher prices, which is likely to benefit Nigeria on the back of rising oil demand.
The analysts are of the opinion that in the short term, the government is likely to focus on increasing security around oil installations and repairing damaged pipelines.
In the long term, the government needs to diversify the economy and reduce its reliance on oil.
“This will be a difficult task, but it is essential if Nigeria is to avoid economic instability,” the experts noted.