Nigeria’s financial troubles deteriorated further yesterday as oil production suffered deficit of record 1.01 million barrels per day, raising the revenue losses by the country and international Oil companies (IOCs) to N10.1 billion ($50.5 million) daily.
Head of Energy Research at Ecobank, Dolapo Oni, who gave this hint, said that the crude production in Nigeria, hitherto the biggest crude producer in Africa, has now dipped to about 990,000 barrels per day. This disturbing news came hours after the renewed militancy in the country’s oil-rich Niger Delta began to take a toll.
In a more drastic estimate of the economic implication of attacks on oil and gas installations, Oni, according to Reuters, said: “Between pipeline repairs and militant attacks, Nigeria is probably producing no more than 990,000 barrels of oil every day.”
Prior to the renewed attacks, the federal government had projected a daily production of 2.2 million barrels in the country’s 2016 budget. This, according to data compiled by New Telegraph, indicates a deficit of 1.01 million barrels per day.
With crude price hovering around $50 per barrel yesterday, the losses in revenue on the 1.01 million barrels deficit amounted to N10.1 billion ($50.5 million) daily. As the renewed militancy in Nigeria dipped the country’s production, the Organisation of Petroleum Exporting Countries (OPEC), also suffered the same fate.
The output of the cartel in May was also down by 120,000 bpd over oil installation attacks in Nigeria. The organisation is, however, scheduled to meet today over the May output slide from near a record high, as attacks on Nigeria’s oil industry and other outages outweighed increases in Iran and Gulf members. Months of militant attacks on pipelines and oil infrastructure in the Niger Delta have crippled production in Nigeria.
The militant group behind the attacks, the Niger Delta Avengers (NDA), vowed in an early communiqué to reduce Nigeria’s economy to “zero.” They appear to be getting their wish. Exports have fallen from about 2.2 million barrels per day to as low as 990,000 barrels per day, analysts said, making Angola Africa’s largest producer of oil, at least for now. The drop in production and the low price of oil globally are major reasons Nigeria is expected to enter a recession by the end of this month.
Aside from Oni, Gail Anderson, Research Director at Energy Research and Consultancy group, Wood Mackenzie, said the militants have been careful in their sabotage. “The attacks themselves have been well-targeted and they’ve been designed to cause maximum damage, and I think they’ve been quite successful in that respect,” Anderson said.
The NDA emerged earlier this year with a blog that took credit for a number of attacks on pipelines in the delta. It also listed demands, including apologies from politicians, the release of an imprisoned separatist leader and a re-distribution of ownership of oil blocks.
Crude has long been Nigeria’s top export. Though President Muhammadu Buhari wants to wean the country off its dependence on oil, it remains the major source of revenue for the N6.06 trillion budget.
“We’re not producing up to the level we need to produce, the government won’t generate the amount of revenue it needs to generate from oil,” Oni said. Repairs on the attacked pipelines will likely take weeks, Oni said, and that might not deter the militants.
The militants blew up one pipeline in Bayelsa State twice, and warned its owners against repairing it, he said. The government is winding down the amnesty programme, but the NDA said it wants the programme to continue.
“They carry out attacks at specific times of the day, when they know they’re able to strike without specific reprisal from the enemy,” Oni said. Buhari is to kick off the cleanup of Ogoniland today. Rehabilitating Ogoniland is one of the NDA’s demands.
Meanwhile, OPEC’s oil output fell in May from near a record high, as attacks on Nigeria’s oil industry and other outages outweighed increases in Iran and Gulf members.A rise in supply from Saudi Arabia plus Iran suggests the group’s top producers remain focused on market share, following the failure of an initiative last April between OPEC and non-OPEC producers to support prices by freezing output. With OPEC meeting in Vienna today, outages are effectively achieving the supply restraint on which producers could not agree.
“There is a tiny chance of a bullish surprise, but as things stand right now, the odds are the continuation of OPEC’s market-share policy,” said David Hufton, of oil brokers PVM. Supply from the OPEC fell to 32.52 million barrels per day (bpd) this month, from 32.64 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. OPEC output has surged since the group abandoned in 2014 its historic role of cutting supply to prop up prices, in a shift led by Saudi Arabia.
There are more indications, however, that some producers are struggling to maintain supply. May’s biggest decline occurred in Nigeria due to militant attacks on the country’s oil industry. The disruption has pushed output to its lowest in more than 20 years.