VANGUARD NEWS

Nigeria’s oil output dropped year-on-year, YoY, by 13 per cent, to 1.346 million barrels per day, mb/d, in October 2021, from 1.540 mb/d in 2017, according to the Organization of Petroleum Exporting Countries, OPEC.

Data obtained from Monthly Oil Market Reports, MOMRs of the organization did not include condensate, which Nigeria’s daily output stands at between 300,000 and  400,000 bpd.

The reports showed that the 1.429 mb/d, highest output, was produced in March 2021, compared to 1.269 mb/d produced in the corresponding period of 2017.

They also indicated that the 1. 228 mb/d lowest output was produced in October 2021, compared to 1.663 bm/d produced in the corresponding period of 2017.

Reasons

However, the reports attributed the general lull in the global oil and gas industry to the prolonged coronavirus pandemic.

“World oil demand growth in 2021 is revised lower by around 0.16 mb/d, compared to last month’s assessment, to stand at 5.7 mb/d. Revisions were mainly to account for slower than anticipated demand from China and India in 3Q21. Global oil demand is now estimated to reach 96.4 mb/d in 2021.

”For 2022, growth in global oil demand remains unchanged compared to the previous month’s assessment, to stand at 4.2 mb/d,” the reports stated.

But investigation by Vanguard showed the fall was also partly fueled by other factors, especially pipeline vandalism, oil theft and illegal refining currently booming in the Niger Delta, which produces a bulk of the nation’s oil.

A recent visit to the region indicated that the illegal operators of the refineries usually cut the pipelines belonging to the International Oil Companies, IOCs, such as Shell Petroleum Development Company Limited, SPDC, Nigerian Agip Oil Company, NAOC, Total Energies as well as indigenous companies before stealing crude to supply feedstock to their plants, which constitute serious environmental hazards to the region.

Also, in its latest report obtained by Vanguard, Shell stated: “The vast majority of oil spills in the Niger Delta continue to be caused by crude oil theft or the sabotage of pipelines, as well as illegal oil refining.

”While the Shell Petroleum Development Company joint venture (SPDC JV) is not responsible for preventing illegal oil refineries, it is committed to preventing attacks and breaches of its pipelines and well heads. In 2020, 92% of oil spills were caused by sabotage and theft – similar to previous years.

“Sabotage incidents often occur in remote areas of the Niger Delta where access is difficult. The SPDC JV works closely with government agencies, non-governmental organisations and communities to proactively minimise spills from illegal activity.

”This involves using simplified zonal pipeline maps to enhance targeted response and prevent incidents from occurring.

“Since 2016, the Shell Petroleum Development Company, SPDC, as operator, has also been able to remove more than 720 illegal theft points. Illegal theft points are identified by regular inspections from the air and on the ground.

”The company has also implemented anti-theft protection mechanisms, such as anti-tamper locks and steel cages for wellheads.”

Budget 2022

However, the low output would not immediately impact negatively on 2022 budget as it was based on 1.8 mb/d (including condensate) and $57 per barrel.

However, the impact could be negative should prices suddenly drop below the $57 per barrel benchmark due to the anticipated lockdown occasioned by the new variant of coronavirus pandemic, known as Omicron.

In his presentation to the National Assembly, President Muhammadu Buhari, had said: “The 2022 to 2024 Medium Term Expenditure Framework and Fiscal Strategy Paper sets out the parameters for the 2022 Budget as follows, conservative oil price benchmark of 57 US Dollars per barrel; daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day) and exchange rate of four 410.15 per US Dollar.”

Experts speak

Commenting on the development, the Ghana National Petroleum Corporation, GNPC, Professorial Chair, Oil and Gas Economics and Management, Institute for Oil and Gas Studies, University of Cape Coast, Prof. Omowumi Iledare, said: “Nigeria’s economy, especially money demand, is highly dependent on oil production.

”Certainly, low production means less royalty and profit, especially with high capital allowance against low output.

“The implication is obvious, less fund allocation to the constituent units–states and LG. Consequently, workers and contractors are not paid at all or on time, goods and services are sold on credit, and circular flow of income is handicapped.

“When contractors are not paid, incentive to hire workers stall and when output is low and profit is badly affected, then investment goes to where returns are more attractive and competitive. Nigeria’s economy, especially money demand, is highly dependent on oil production.”

The Lead promoter, EnergyHub Nigeria, Dr. Felix Amieyeofori, said the nation should work towards having more than one major source of revenue, noting that Nigeria was endowed with other potential foreign exchange generating resources, including solid minerals, which should be given priority.

Energy transition

However, there were speculations that the global quest for energy transition would impact on investment and, by extension, oil production and export.

But some stakeholders, including investors, do not have much problems investing in petroleum, insisting that natural gas, which remains a cleaner resource would serve as  transition fuel in the coming years.

Speaking at the just-concluded 2021 Society of Petroleum Engineers (SPE) International Conference and Exhibition (NAICE) in Lagos, the Minister of State for Petroleum, Timipre Sylva, had said: “As a government, we are determined to encourage more penetration of natural gas and its derivatives for domestic utilisation, power generation, gas-based industries and propulsion in all aspects of the national economy.

”This would in a fundamental manner, address the great challenge posed by volatile oil market, the environmental issues and public health concerns.”