Nigeria 3rd oil producer
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Nigeria 3rd Largest Oil Producer: How Has it Impacted the Nation?

Nigeria started the year as the leading crude oil producer in Africa but dropped to the second and, later, the 3rd position in August 2022. According to the Nigerian Upstream Petroleum Regulatory Commission’s report, Nigeria’s daily crude oil production declined from 1 million barrels per day (BPD) in August to 972,394 BPD.

From the report, it declined by 30.22 % compared to January’s output. However, Bloomberg’s survey of OPEC’s monthly output said it dropped to 1.13 million barrels per day (BPD).

Despite the drop, the country’s November monthly oil market report (MOMR) from the Organization of Petroleum Exporting Countries (OPEC) indicated that the country was able to retain its position.

Although the country is yet to retain its leading position, its current position is commendable despite being faced with different factors that led to its current state. Apart from the flood, which resulted in the declaration of Force Majeure, analysts said the decline in production is due to oil theft, vandalism, lack of investment and production shut-ins.

As Nigeria is an oil-dependent country, this has seen the returns on the output reduced. Let’s look at some factors that contributed to Nigeria being the 3rd oil producer in Africa.

Pipeline vandalism

This is one of the recurring issues in the Nigerian oil and gas sector. This has increased the issue of theft and illegal oil refining, especially in the Niger Delta. Shell company, the most prominent International Oil Company in Nigeria, said, “In the last quarter of 2021, crude oil theft from pipelines across the region increased ostensibly due to rising oil prices, which made the activity more profitable.

Security risks have heightened, and production in some areas has been put on hold. The Nigerian National Petroleum Corporation, NNPC, has reported that crude thefts in 2021 reached 200,000 barrels per day – a quarter of onshore production.”

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The company further said, “Shell companies in Nigeria have a track record of strong production. But in 2021, the combined output from the SPDC JV and SNEPCo (Bonga) fell to 493,000 barrels of oil equivalent per day from 614,000 in 2020.

The SPDC JV produced 383,000 barrels of oil equivalent in 2021, compared with 497,000 barrels in 2020. The fall in output resulted from curtailed oil production because of heightened security issues, such as crude oil theft and illegal oil refining. Production numbers were also down due to divestment action, including selling SPDC’s 30% interest in OML 17 for $533 million.”

In combating this, Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Company Limited (NNPCL), said his team have successfully deactivated 395 illegal refineries, destroyed 274 reservoirs and 1,561 metal tanks and seized 49 trucks.

Insecurity of investments

This has caused a decline in investments in the oil and gas sector. The sector suffers the ripple effect in the form of the lack of infrastructure, decreasing field productivity and technical production. This is further compounded by the lack of biddings to meet the exploration and development of fields.

Apart from bidding, there has also not been any lease except the one in 2007. This has resulted in the maturity of basins while production capacity remains stagnant. To increase technical production, there is a need for more wells and reserves.

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