THIS DAY

Nigeria’s Oil Production Drops Below 1mbpd

•Can’t meet 2.1mbpd OPEC quota
By Chika Amanze-Nwachuku, 07.30.2008

There are strong indications that Nigeria, the sixth biggest oil producer in the world and Africa’s biggest oil producer, can no longer meet the Organisation of Petroleum Exporting Countries (OPEC) production quota.

The country’s current production level has dropped below 1 million barrels per day (mbpd) owing to frequent shut-ins due to renewed attacks on oil facilities in the Niger Delta region.

Prior to the escalation of violent attacks on oil installations, Nigeria produced between 2.5 and 2.6 million barrels of crude oil per day.

The country with its abundant oil potentials has the capacity to produce about 3.2 million barrels of oil per day.

Between late last year and January, this year, Nigeria’s crude production had appreciated following a directive by the Federal Government that oil companies operating in the country should increase output from the deep offshore fields.

Sequel to the increase in crude production, Nigeria was able to meet its daily production quota of 2.1 million barrels per day allocated to her by OPEC.

However, following the recent upsurge in attacks on oil companies’ facilities, particularly the Royal Dutch Shell that produces about 20 per cent of the nation’s oil, coupled with theft of oil in the region, Nigeria’s oil production is now less than 1 million barrels per day, far below the 2.1million barrels OPEC mark.

An official of the Ministry of Energy confirmed last night that, “Nigeria at the moment cannot meet OPEC quota, because production has gone down below 1 million barrels per day.”

“How can we meet the OPEC quota when we now produce less than 1 million barrels per day. This is the lowest level so far recorded. There is serious problem and it does not look like the end is near.

“Only recently, Bonga field was attacked. We are yet to recover from that one. The militants have continued their attacks, and others facilitieshave been hit.

“The NPDC is not producing because of Niger Delta crisis. Where are we going from here,” the official
said.

The attack on Bonga, Nigeria’s biggest offshore facility and Chevron installation in June had resulted in the shut in of about 250,000 barrels per day.

Before then, Shell, the worst hit, had a shut-off of about 400,000 barrels per day owing to incessant attacks on its facilities by militant groups in the region.

The attacks on Shell has not only adversely affected Nigeria’s crude quota, but has robbed the country,
since oil accounts for more than 80 per cent of its foreign earnings.

In its recent report, OPEC had noted that Angola had topped Nigeria in terms of crude production due to crisis in the oil-rich Niger Delta.
Reacting to the report by OPEC, Minister of State for Energy (Petroleum), Odein Ajumogobia, SAN, had told newsmen in Madrid, Spain, that the OPEC statement came in the wake of the attacks on Shell Bonga field and Chevron facility, which had resulted in the shut in of about 250,000 barrels of oil per day.

He said Nigeria’s output at that time (early this month), stood at about 1.886 million barrels a day.

“Our production levels currently are about the same and because of the issues in the Niger Delta, it fluctuates. In fact, at the time that statement was made, we just lost about 250,000 barrels to separate attacks on Bonga and Chevron. It is also of utmost importance to say that Nigeria’s capacity is actually over 3 million barrels per day and half of the shut in capacity is the direct consequence of the issues regarding the security in the Niger Delta area.

“There are security challenges in the Niger Delta, but there is no doubt that we are facing those challenges, through the process of enhancing security in the area. We recognise the issue as very important, and have to confront it for us to grow production,” he said.

However, the production level, which has been hovering between 1.8 million barrels and 2 million barrels per day, has reduced drastically from the about 1.4 billion mid this month to below 1 million, causing shivers in the industry sector that it may take some time before the production could boom again.

Nigeria’s crude oil has been the preferred grade in the international market due to its low sulfur content.

Nigeria’s crude oil production which had hovered between 1.8 million and 2 million barrel per day had dropped further, as the Shell Petroleum Development Company (SPDC) Monday shut in production of 130,000 barrels per day owing to an attack on its Nembe Creek trunk line.

The Movement for the Emancipation of the Niger Delta (MEND) had last week vowed to renew pipeline attacks within 30 days in protest against a statement credited to the Acting Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Abubakar Yar’Adua, that the corporation paid militants about $16 million to enable it access the damaged Chanomi Creek pipeline for repairs.

The corporation had since debunked the report, insisting that it paid the communities and not any militant group in order to have access to the pipeline.

Niger Delta militants had earlier blown up the Chanomi Creek pipeline, which feeds the Warri and Kaduna Refineries in 2006.

The development had forced the country to import all its petroleum products as the two refineries as well as the Port Harcourt Refinery were out of operation.

MEND spokesman, Jomo Gbomo, who signed the statement, had said the action was “in keeping with our pledge to resume pipeline attacks within the next 30 days”.

The Nembe Creek line was last attacked on May 26, prompting SPDC to declare a “force majeure” on Bonny Light crude exports for June and July.

Force majeure is a legal clause that allows producers to miss contracted deliveries because of circumstances beyond their control.