EIA expects Nigeria’s oil production to remain low till 2017
The United States Energy Information Administration (EIA), expects Nigeria’s oil production to remain depressed through 2017, as a result of militant attacks.The EIA, which made this disclosure in a media statement on Monday, said that because payouts are just one of the Niger Delta Avengers (NDA’s) many demands, crude oil production stoppages are likely to continue until the Nigerian government and the NDA can reach a comprehensive agreement.
According to the EIA, crude oil production disruptions in Nigeria reached 750,000 barrels per day (bpd) in May 2016, the highest level since January 2009. It added that the increased disruptions come as militants continue to focus attacks on oil and natural gas infrastructure in the West African region. EIA stated: “Nigeria is a member of the Organisation of the Petroleum Exporting Countries (OPEC), and was Africa’s largest oil producer until Angola’s oil production surpassed Nigeria’s earlier this year.
“Nigeria’s crude oil production disruptions are concentrated in the Niger Delta region, an oil-rich area bordering the Gulf of Guinea that is the mainstay of the country’s crude oil production. Since the beginning of 2016, NDA have conducted many attacks on oil and natural gas infrastructure throughout the region. Although not the only militant group conducting attacks in the region, the NDA is currently the most active.
“The NDA’s attacks have resulted in immediate and severe disruptions in crude oil production, as some of the attacks have targeted key oil-gathering and export infrastructure. Nigeria’s oil production averaged 1.9 million b/d in 2015. By May 2016, Nigerian oil production had fallen to 1.4 million b/d, nearly a 30-year low.
“After some repairs, and in the absence of major new attacks, some of the disrupted production was restored, and crude oil output averaged 1.6 million bpd in June.”EIA noted that despite this recent increase, the continued threat of militant attacks poses a risk to sustained production. The NDA has claimed responsibility for several attacks since the beginning of July, and outages once again rose in July.
According to trade press reports, exports of multiple Nigerian crude oil grades, including Bonny Light, Forcados, Brass River, and Qua Iboe, have been under periods of force majeure since the beginning of 2016, meaning companies are released from export obligations as a result of circumstances beyond their control.
EIA said that significant disruptions in oil production resulting from NDA attacks, combined with relatively low crude oil prices, have had a significant effect on Nigeria’s economy. The U.S agency stated: “In 2015, Nigeria produced 2.3 million bpd of petroleum and other liquids, of which 1.9 million bpd was crude oil and the remainder was condensate, natural gas plant liquids, and refinery processing gains. Nigeria’s 2015 production was slightly lower than the previous year because of natural field decline.
“The 125,000-bpd Usan deepwater field was the last major oil field to start production in Nigeria, which was in February 2012. Since then, there have been smaller start-ups that are extensions of Nigeria’s Bonga and Erha deepwater fields. The 40,000-bpd Bonga North West field came online in August 2014, and the Bonga Phase 3 project started production in September 2015, which will eventually add 50,000 bpd. The Erha North Phase 2 project came online in October 2015 and will eventually add 65,000 bpd.15 The projects have helped to partially offset production declines.
“Several planned deep water projects in Nigeria have been repeatedly pushed back because of regulatory uncertainty. Some draft versions of the Petroleum Industry Bill (PIB) have prompted questions about the commercial viability of deepwater projects under the proposed changes to fiscal terms. Deep-water projects have typically included more favorable fiscal terms than onshore/shallow water projects, but the PIB, if passed into law, is expected to increase the government’s share of production revenue coming from deepwater projects.
“As a result of the uncertainty, IOCs have sanctioned (reached a final investment decision) on only one of eight planned deepwater oil projects Both sanctioned and unsanctioned deepwater oil projects have the potential to bring online almost 1.1 million bpd of new production over the next five or more years, however, only 200,000 bpd has reached the critical development milestone. If global crude oil prices remain low, this will also exacerbate project delays in Nigeria.”