Rising oil thefts and workers’ strikes have led to a huge drop in Nigeria’s oil production output, culminating in the loss of hundreds of billions of naira in oil earnings, OKECHUKWU NNODIM reports
Crude oil production in Nigeria crashed by over nine million barrels between March and April 2023, leading to a cumulative revenue loss of about N356bn, findings by The PUNCH showed on Sunday.
Industry operators blamed the plunge in oil production on the recent strike by some oil workers, which warranted the shutdown of production at selected wells for a period, as well as the theft of crude by thieves.
They, however, called for tougher investigations, as they alleged that some persons at oil export terminals could be culpable in the theft and fraud at these terminals.
They also pointed out that this could be the reason why the President, Major General Muhammadu Buhari (retd.), gave an order last week directing the Nigerian Upstream Petroleum Regulatory Commission to monitor crude oil production by taking over the regulatory oversight of crude oil export terminals nationwide.
An analysis of the latest oil production figures obtained from the NUPRC indicated that while Nigeria’s output in February was 1,306,304 per day, it fell to 1,268,202 per day in March, before crashing to 998,602 barrels per day in April.
This showed that between February and March, the country lost 38,102 barrels of crude oil daily, representing a total of 1,181,162 barrels for the 31 days of March.
Also, between March and April, Nigeria’s oil production crashed by 269,600 barrels per day, which translates to a total of 8,088,000 in the 30 days of April.
Country Economy, a global statistical firm, put the average cost of Brent, the international benchmark for oil, in March 2023, at $78.43/barrel.
Therefore by losing 1,181,162 barrels in March, Nigeria lost a total of $92.64m (N42.71bn at the official exchange rate of N461/$), during the period under review.
Similarly, data from Statistica, another international statistical firm, showed that the average cost of Brent in April was about $82/barrel, meaning that Nigeria lost $679.4m (N313.2bn) last month, due to the 8.1 million barrels drop in oil output.
A summation of the monthly losses indicated that Nigeria lost a total of about 9,269,162 barrels of crude oil valued at N355.9bn during the two-month period.
Workers’ strike
Last week, a Bloomberg survey showed a decline in Nigeria’s oil production, as the outcome of the survey reversed a surge seen earlier this year when the country reached an accord with a former warlord in the oil-rich Niger Delta region to halt massive oil theft.
The report stated that the main driver of April’s dip was industrial action by Exxon employees that began on April 13 and caused the United States Major to declare force majeure across its operations.
It stated that while an end to the walkout was announced two weeks later, the company’s output declined by more than half last month compared with March.
Workers at Exxon Mobil facilities in the country returned to work last week, allowing production and exports to resume after a two-week industrial action, a development which hurt the country’s oil output.
Bloomberg’s survey is based on ship-tracking data, information from officials, and estimates from consultants including Kpler Ltd., Rapidan Energy Group, and Rystad Energy.
The oil fall
The PUNCH exclusively reported last week that Nigeria’s crude oil output dropped by 38,102 barrels per day in March, translating to a cumulative loss of about 1,181,162 barrels, and signaled the first plunge in oil production in seven months.
But the drop grew worse in April, as it plunged by 269,600 per day when compared to what was recorded in the preceding month.
Nigeria’s oil production had been on the rise since September 2022, following concerted efforts by the Federal Government and stakeholders to curb oil theft in the sector.
The rise in oil output was, however, not sustained in March, as figures from the NUPRC showed that while the country pumped 1,306,304 barrels of crude daily in February, the volume dropped to 1,268,202 barrels per day in March and further went down to 998,602 barrels per day in April.
Nigeria recorded its lowest oil production volume of 0.937 million barrels per day in September 2022. The Federal Government and oil sector players blamed this on the massive crude theft in Nigeria’s oil-rich Niger Delta.
The situation also led to humongous revenue losses for the country, international oil companies operating in Nigeria, as well as indigenous operators in the industry.
But the country’s oil output started improving after September, following concerted efforts by security officials and oil operators, as industry figures showed that crude production rose to 1.014 million barrels per day in October.
This indicated an increase of 0.077mbpd when compared to the 0.937mbpd output in September. In November, the country pumped 1.185mbpd crude, representing an increase of 0.171mbpd when matched against what was produced in October.
The rise in output continued in December last year, as Nigeria produced 1.253mbpd in that month, indicating an increase of 0.05mbpd when compared to its output in November.
The 1.258mbpd oil production in January 2023 was about 23,000bpd higher than the 1.235mbpd crude oil output in December 2022.
The momentum was sustained in February, with an output of 1.31mbpd. But the volume dropped to 1.27mbpd in March, putting an end to the seven-month run in Nigeria’s oil output. It further went down in April to 0.998mbpd.
Operators react
Commenting on the development, the President, of the Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, told our correspondent that the drop in oil output posed a dangerous sign.
“That is a very dangerous signal of trouble that is coming. This is because we thought that with what the Tompolo team is doing, we should be approaching about two million barrels of crude oil production per day.
“So if the volume of reduction per day is this frightening, then it is something that calls for urgent investigation. If we have dropped from over 1.3 million barrels per day to about 900,000 barrels per day, that is already about 400,000 barrels that are lost daily and it is a very negative and bad trend for Nigeria.
“It portends an economic downturn that could be drastic if the situation continues. However, I believe that with all of these new oil discoveries in Nasarawa and Bauchi, and production commencing, there may be a positive change,” Gillis-Harry stated.
Meanwhile, the PETROAN president stressed that Nigeria should talk about how to grow its oil production and not about how its fortunes were being dwindled.
“Our security personnel down to the production sector, including the NNPCL and everybody, should have their hands on deck. Because this two-month consecutive drop is a very dangerous trend, especially since we have engaged a private security outfit to also help with this oil situation.
“So that is frightening and I think that we need to fix it, stem the drop, and shore up our daily production of crude oil, since we know the significance of oil exports to our foreign exchange earnings as a country,” Gillis-Harry stated.
To help stem the loss of crude, The PUNCH recently reported that the Federal Government directed the NUPRC to monitor crude oil production and take over the regulatory oversight of crude oil export terminals nationwide.
It gave the order in a memo signed by the Chief of Staff to the President, Prof. Ibrahim Gambari, and addressed to the Minister of State for Petroleum Resources, as well as the chief executives of NUPRC and the Nigeria Midstream and Downstream Petroleum Regulatory Authority.
The memo, dated May 3, 2023, pointed out that the directive was from the President, Major General Muhammadu Buhari (retd.), and was in accordance with the Petroleum Industry Act 2021.
The memo, titled, ‘Regulatory Oversight of Crude Export Terminals,’ read in part, “The above-mentioned subject matter and the relevant correspondence (Ref: NUPRC/1195/Vol.1/36) refers.
“I write to inform you that Mr. President has: (a) Directed immediate compliance with the resolution NASS/9S/R/03/934 of the Senate that NUPRC Is the sole and only regulatory entity to regulate and monitor the activities of all existing crude oil export terminals in Nigeria subsists in compliance with section 7ee of the PIA (2021);
“(b) Directed that the exercise of any regulatory role by the NMDPRA on any existing crude oil export terminal established prior to the effective date of the PIA should cease immediately; and (c) Directed the Minister of State for Petroleum Resources to ensure immediate compliance and report back within 14 days that the resolution as stipulated in (a) above are being adhered to by the NUPRC, NMDPRA, NNPCL (Nigerian National Petroleum Company Limited), FMITI (Federal Ministry of Industry, Trade and Investment), industry players and relevant MDAs.”
The memo was copied to the Secretary to the Government of the Federation, ministers of Trade and Transportation, Director-General, Department of State Services, and National Security Adviser, Group Chief Executive of NNPCL.
Others include the Chairman, of the Oil Producers Trade Section, the President of, the Lagos Chamber of Commerce, Industry, Mines and Agriculture, as well as the Chairman, of the Independent Petroleum Producers Group.
Since its inauguration a few months after the President’s assent of the PIA 2021 in August, the NUPRC has been pushing for the production of additional barrels of crude oil, in order to boost the output from Nigeria.
The commission’s Chief Executive, Gbenga Komolafe, for instance, announced recently that the commission was focusing on shut-in wells that could be revived.
He stated that in pursuance of this, the commission inaugurated a committee on June 23, 2022, to conduct an industry-wide study on the reactivation of shut-in strings.
“The committee has submitted its report and includes recommendations categorized into quick wins, medium and long-term initiatives that will enhance national oil and gas production volumes.
“Findings from the report revealed that over 900,000 barrels of oil per day can be earned from the quick win interventions, while the medium and long-term initiatives could potentially add 1.2 million barrels of oil per day if properly and fully implemented.
“The total number of strings that need to be revived is also known and we have commenced engagement with the relevant operators to operationalize the initiative,” Komolafe stated.
