Nigeria may see improved rig count as export resumes at Forcados terminal

Nigeria’s poor crude production output continued to linger and was last month reflected in its declining rig count and production volume, as reported by the latest data from the Organisation of the Petroleum Exporting Countries (OPEC).

Specifically, Nigeria’s rig count dropped to seven from 10 in August, even as the reported volume showed a production volume of 938,000 barrels a day, down from 972,000bpd reported in August. There are hopes that the volume will improve with the resumption of activities at Forcados terminal.

On Wednesday, the cartel made a substantial cut to its global oil demand growth forecast for both this year and 2023 in response to a deteriorating economic outlook. The revision comes less than a week after OPEC+ coalition agreed to a 2mn b/d crude quota cut driven by the same concerns.

While other producers have been recording a boom as a result of high prices, Nigeria and other countries lagging in their production output will maintain their quota under the cartel’s agreement.

Nigeria’s output has declined steadily since the first quarter of 2020, when the country produced roughly double the amount, according to the NUPRC data.

The government blames rampant theft on the pipelines that crisscross the Niger Delta for shutting down wells and killing off investment. Production of three major export grades – Bonny, Brass and Forcados – has shriveled in recent months, with none of them accounting for more than 8,000 barrels per day in September.

Nigeria aims to add 500,000 barrels a day to its production by the end of November, mainly by resuming operations at Shell Plc’s Trans-Niger pipeline and Forcados terminal, according to the Group CEO of NNPCL, Mele Kyari.

Yesterday, Shell confirmed readiness to resume export operations by the end of this month when ongoing essential repairs would have been completed.

“In addition to the repairs, we are working to remove and clamp theft points on the onshore pipelines to ensure full crude oil receipt at the terminal,” SPDC’s Media Relations Manager, Abimbola Essien-Nelson, said in a statement on Wednesday.

According to Essien-Nelson, the active illegal connections to SPDC joint venture’s production lines and facilities in western Niger Delta as well as the inactive illegal connection to the onshore section of the 48” Forcados Export Line are in the company’s ongoing programme to remove illegal connections on the pipelines that feed the terminal.

She said, “SPDC gives priority to the removal of active illegal connections and to illegal connection points that have leaks. This scheduled programme is continuous as new illegal connections are identified during the surveillance of the pipelines. An example of such an illegal connection is that on the onshore section of the 48” Forcados Export Line which is currently not active and has no sign of leak at the interconnection point.”

Essien-Nelson reiterated SPDC’s commitment to running its assets safely, reliably and in accordance with globally accepted standards.

“SPDC continues to work tirelessly, alongside government and partners, towards the eradication of crude theft from its infrastructure,” she said.

Global oil demand growth is now forecast at 2.64mn b/d this year, 460,000 b/d below last month’s projection, OPEC said yesterday in its latest Monthly Oil Market Report (MOMR). Demand growth for next year has been revised down by 360,000 b/d to 2.34mn b/d.

OPEC cites “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies” as factors behind the 2022 revision. Last week the wider OPEC+ group gave the same reasons for a 2mn b/d decline in its collective crude output target from November.

Notably, OPEC now sees demand in China, the world’s largest crude importer, dropping by 60,000 b/d this year. Last month it was forecast that Chinese demand would rise by 120,000 b/d in 2022. OPEC sees demand for its own members’ crude at 28.68mn b/d this year and 29.45mn b/d next year, lower by a respective 200,000 b/d and 300,000 b/d from the previous MOMR.

On supply, OPEC has trimmed its forecast for non-Opec liquids growth to 1.93mn b/d this year, down by 180,000 b/d from the previous report, with downgrades in OECD Europe, Asia-Pacific and parts of Eurasia offsetting gains in Latin America. Increases in oil, gas and fracking activity will support US production, but “severe inflationary pressure, coupled with logistical bottlenecks and shortages of material and labour, are posing additional challenges”, OPEC said.

The group has trimmed its US oil output growth outlook by 20,000 b/d from last month to 1.09mn b/d in 2022. It has lowered its Russian oil production growth estimate by 20,000 b/d to just 60,000 b/d this year. For 2023, the projection for non-Opec liquids supply growth has been reduced by 200,000 b/d to 1.73mn b/d.