Nigeria oil production drops to four-year low

Nigeria is Africa’s largest crude oil producer, but recent production difficulties have brought the West African state close to the brink of losing that title to Angola. Disruption caused by theft (often from pipeline ‘bunkering’), sabotage and technical problems has dragged the country’s output down to a four year low to approximately 1.5 million bpd.

This is an urgent issue for a nation that relies on oil revenue for approximately 80% of its income and was expecting to work with profits from 2.53 million bpd this year.

Oil Theft and Infrastructure issues

The country has had longstanding problems with oil production; it was only in 2009 that an amnesty was signed with militants in the Niger Delta, which persuaded fighters to accept monthly cash payments instead of stealing crude oil and taking hostages. Indeed, according to the Financial Times, after the amnesty was signed, more than 26 000 militants agreed to disarm and the country saw a fall in the number of oil-worker kidnappings and attacks on pipelines.

The amnesty has, however, not stopped the problem of oil theft. The small scale thefts that are often portrayed in the media are only part of the problem: A Nigerian security official was quoted as saying that, “The truth is that it [oil theft] is a high technology crime and there is a well-built cartel responsible for oil theft in the country, and until you smash their set-up, illegal bunkering will not stop.”

The official added, “They are highly connected people in and outside government, oil companies, businessmen, retired and serving military officers, including people you never thought could be involved. Forget about those you people in the media refer to as oil thieves. I mean those that steal crude oil from well heads with Cotonou boats/canoes, and then hide in the bush to refine and sell to petrol station owners. Those people are in the kindergarten section of the business. The main people are the ones you do not see.”

The claim that a large-scale cartel is behind oil thefts begins to make some sense when it is considered that at least 150 000 barrels of oil are stolen every day in Nigeria. From 2009 to 2011, it was estimated by the Nigeria Extractive Industries Transparency Initiative that approximately US$ 11 billion of oil revenue was lost due to theft; according to the government, by 2012 losses had risen to a staggering US$ 1 billion per month.

The oil theft of oil direct from pipelines has caused both Shell and Eni to declare force majeure so far in 2013; the process of bunkering also damages the pipelines, leading to delays before production can resume. In a country with 6000 km of pipelines, and an ageing infrastructure, the constant problem of theft is beginning to take its toll both physically and financially.

Global Issues

Like many conventional crude producers, Nigeria has also started to see exports (particularly to the US) decline. The combined impact of the US Shale boom, economic woes in Europe and a growing number of oil producing nations across Africa are cutting in to the Nigeria’s market.

Edited from various sources by David Bizley

Read the article online at: https://www.worldpipelines.com/business-news/28082013/nigeria_oil_production_drops_to_four_year_low/