Oil & Gas

Amid declining production, Nigeria loses 4.82m oil barrels to shutdowns, vandalism in upstream operations

Access Bank
Nigeria’s oil industry has continued to bleed owing to incessant shutdowns due to ageing upstream infrastructure, vandalism and community-related issues, with the country losing over 4.82 million barrels to the challenges, industry data obtained by ThisDay has revealed.

Although a marked reduction from the 6.3 million barrels lost in the preceding month, the country’s production losses recorded in October came mainly from Forcados, Bonny, Odudu, Brass, Yoho, Urha, Ajapa and Aje in the Niger Delta.

But a review showed that the situation will most likely continue unmitigated, at least in the short term, as Shell a few days ago announced a halt in crude shipments from the same Forcados, a situation that may negatively impact the country’s revenue stream and worsen existing shortages in the international market.

Shell announced that it had declared “force majeure” on exports of Nigerian Forcados crude oil after a malfunctioning barge obstructed tanker path. The blend is one of Nigeria’s unique crude, with an average turnover of about 200,000 barrels per day.

In its report of events that affected oil production in October, 2021, the Nigerian National Petroleum Company (NNPC) Limited, explained that due to technical problems, pumping was suspended into Forcados while community-related issues delayed the reinstatement of activities at a Heritage Energy facility.

Also, there was shut-in from Walter Smith due to low pressure as the combination of these, the NNPC said, led to the loss of 456,563 barrels in the Forcados terminal.

In Bonny, the document showed that Aiteo shut down production due to some infractions at Owangbai Tuma axis, leading to a total loss of 1.03 million barrels of oil.

It was the same story in Odudu, where there was a decrease in production due to maintenance work at the facility, effectively bleeding Nigeria to the tune of 1.250 million barrels of crude oil in the period under review.

For Brass, the Energia injection into the line was suspended due to pipeline damage as well as shut-in of platforms due to flow line leakage, pressure build-up, high sand production and community issues. These caused a total shut-in of 106,000 barrels.

Furthermore, a faulty valve in the Yoho terminal led to a loss of 420,000 barrels, while in Urha 1.468 million was lost due to shutdown for maintenance.

Similarly, production on the Ajapa terminal was reduced by 30,000 barrels while that of Aje decreased by 62,000 barrels of crude oil.

The previous month, with an estimated $70 per barrel, Nigeria lost roughly $441 million to similar shutdowns, with the assets mostly affected being Sea Eagle, Brass, Yoho, Qua Iboe, Excravos, Urha, Ajapa and Otakikpo.

Although the Group Managing Director of the NNPC Ltimide, Mallam Mele Kyari, has assured that by the end of this year, Nigeria will be able to meet its allocation from the Organization of Petroleum Exporting Countries (OPEC), the country has been lagging behind.

In a similar report in August, ThisDay reported that Nigeria lost 6.035 million barrels of crude oil to emergency shutdowns, according to data from the company.

At an average of $73 at the time, that would be a whopping sum of $438 million shortage posted for the month and roughly N219 billion at N500 exchange rate to the dollar.

Put side by side the NNPC’s contribution of N47.162 billion to the federation account in that month, the huge 6 million barrels worth over 200 billion, dwarfed the entire funds shared in the joint pool by the federal, state and local governments.

It was also roughly the same amount to be allocated to the host communities fund in the Petroleum Industry Act (PIA), if the law had taken effect in the beginning of this year.

Although Nigeria has regained the top spot among crude oil producing countries in Africa with the nation’s crude oil production averaging 1.27 million barrels per day in November, according to the Organisation of Petroleum Exporting Countries (OPEC), its crude oil production has continued to far below target.

Nigeria’s oil output fell to about 1.23 million barrels per day from about 1.25 million bpd the previous month, with Libya seeing its oil production rise to 1.24 million bpd for the month.

OPEC indicated that Nigeria pumped an additional 47,000 barrels per day when compared to the 1.228 mb/d produced averagely in the month of October 2021, an insignificant number when compared to the latest loss figure of 4.82 million barrels.

Despite the 47, 000 rise, several countries, such as Angola and Nigeria, are pumping well below their quotas, increasingly concentrating the group’s spare production capacity in Saudi Arabia, the UAE and Kuwait.

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