Nigeria’s oil industry in turmoil as production slumps to four-year low in 2020

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Nigeria’s oil industry slumped in turmoil in 2020 as crude and condensate production slumped to around 1.79 million b/d last year from 2.04 million b/d in 2019, according to S&P Global Platts estimates.

This was the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing the country’s production to as low as 1.4 million-1.5 million b/d at points that year.

President Muhammadu Buhari recently admitted that the country has been suffering heavily following a sharp drop in output and depressed global oil prices.

“We are being squeezed to produce at 1.5 million b/d against a capacity to produce 2.3 million b/d… now the oil industry is in turmoil,” Buhari said.

Under the latest OPEC+ deal, Nigeria has committed to keeping its crude output at 1.52 million b/d for January, 313,000 b/d below its baseline under the deal of 1.829 million b/d.

Platts Analytics expects Nigerian crude production to grow from 1.4 million b/d in December to over 1.7 million b/d in April, and then holding at around 1.9 million b/d in the second half of the year.

But Nigeria’s production growth is threatened by fiscal stress, which may pressure amnesty payments to former militants, Platts Analytics added in a recent note.

A presidential amnesty program for militants to maintain peace in the Niger Delta, the country’s main oil producing region, remains in place but there are concerns that militancy might be picking up again.

Faced with the grim prospect of declining demand for oil and consequently lower revenue, Nigeria will aim to trim oil production costs to $10/b in 2021, from the current range of $15-$35/b, head of state energy firm Nigerian National Petroleum Corp. Mele Kyari said.

“In the face of the clear realities on ground, reducing costs of production and eliminating wastages will be the main focus if our oil industry must remain in business and be competitive,” Kyari said, adding: “By the end of 2021, we want to achieve $10/b oil production. No project will be allowed to take-off except we know it can pay for itself.”

This was the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing the country’s production to as low as 1.4 million-1.5 million b/d at points that year.

President Muhammadu Buhari recently admitted that the country has been suffering heavily following a sharp drop in output and depressed global oil prices.

“We are being squeezed to produce at 1.5 million b/d against a capacity to produce 2.3 million b/d… now the oil industry is in turmoil,” Buhari said.

Under the latest OPEC+ deal, Nigeria has committed to keeping its crude output at 1.52 million b/d for January, 313,000 b/d below its baseline under the deal of 1.829 million b/d.

Platts Analytics expects Nigerian crude production to grow from 1.4 million b/d in December to over 1.7 million b/d in April, and then holding at around 1.9 million b/d in the second half of the year.

But Nigeria’s production growth is threatened by fiscal stress, which may pressure amnesty payments to former militants, Platts Analytics added in a recent note.

A presidential amnesty program for militants to maintain peace in the Niger Delta, the country’s main oil producing region, remains in place but there are concerns that militancy might be picking up again.

Faced with the grim prospect of declining demand for oil and consequently lower revenue, Nigeria will aim to trim oil production costs to $10/b in 2021, from the current range of $15-$35/b, head of state energy firm Nigerian National Petroleum Corp. Mele Kyari said.

“In the face of the clear realities on ground, reducing costs of production and eliminating wastages will be the main focus if our oil industry must remain in business and be competitive,” Kyari said, adding: “By the end of 2021, we want to achieve $10/b oil production. No project will be allowed to take-off except we know it can pay for itself.”

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