Can NPDC Sustain Production Rise In 2019?

To Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), the year 2018 was very successful for the company after achieving a boost in daily crude oil evacuation and even replacing the 36 Opuama-Otumara pipeline. The recent engineering procurement, construction and installation (EPCI) of the 16’’x36 export pipeline in Oil Mining License (OML 40) is a reflection of how far the company has come in terms of growing its production and competency base.

The project replaced the over 40 year old 36 kilometer Opuama-Otumara export line in order to ensure its availability, reliability and reduction in huge operational expenses on pipeline repairs and production losses. Other objectives include increase in crude oil evacuation (volumetric) capacity from 12,000 barrels of oil per day (bopd)to 80,000bopd and to significantly and to significantly reduce, if not eliminate the possibility of rupture of leakage and its attendant environmental pollution.
Nigeria’s increased oil production from 1.86 million bpd in 2017 to 2.09 million bpd in 2018 represents a 9 percent increase in crude production.

NPDC, on its part, had in 2017 said it would increase its production from the 180,000bpd to 300,000bopd by 2018 and also projected to hit 400,000bpd and 500,000bpd by 2019 and 2020 respectively. With the addition of 200,000bpd into crude production from the Egina Floating Production Storage and Offloading (FPSO), the firm is poised to increase production in 2019.

Maikanti Baru, Group Managing Director, NNPC, in his End-of-Year statement acknowledged that the production will continue to increase considering the capacity put in place by the corporation and other operators for steady growth. He described the feat as the strongest production growth within the oil industry in recent times.

He cited the 200,000bpd Egina FPSO recently added into the nation’s oil production as one of the factors that would propel production in growth in 2019. To Baru the firm might surpass its 2019 projections of 400,000bpd.

Despite the achievements recorded in 2018 and the prospects in 2019, the challenge before the NNPC subsidiary is on how to sustain the production rise beyond projections in the 2019. Available information has shown that irrespective of the feat achieved by the NPDC, the 2018 production increase still fell below the projected 2.3 million bpd by the federal government in the 2018 budget. It is also lower than the 2.3 million bpd projection for the 2019 budget. It is only time that will tell if the company would meet or surpass the federal government projections in 2019.

Prof. Wumi Iledare, Director of Energy Information Division of the Centre for Energy Studies, and oil and gas expert, is of the view that it is possible for NPDC to increase production in 2019. But he expressed concern over non-passage of the Petroleum Industry governance Bill (PIGB). He said the NPDC cannot sustain their production unless they build capacity and get the right support from the government.

“It depends on budget and everything is possible if the country do the right thing. I think the management at NPDC knows exactly what they want to do. They what to be the largest indigenous oil producer in Africa and that will require a lot of investments. And again that is why we continued to advocate for the PIGB that will be able to support their desire to be commercialised. So it is possible.

“If NPDC wants to sustain their production, then they must build capacity because they need capacity to do that. Because you can’t just produce it to sell, you have to have capacity to sustain production for a particular period of time. And with the capacity of 2.3 million and 2.5 million bpd that Nigeria has, producing 2 million bpd is not necessarily a bad thing. And if you look at OPEC quota you will realise that some of our production lines are not included.”

Likewise, Ibe Kachikwu, minister of state for petroleum resources, said the federal government is targeting to grow the crude oil production to 2.2 million bdp by the end of January, 2019. Speaking during the presentation of the petroleum industry scorecard from 2016 to 2018, Kachikwu said by the end of 2019, crude oil output would have hit 2.5 million bpd, based on the coming on stream of the Egina field and the recently approved 30 field works which have the capability of increasing Nigeria’s output by 500,000bpd.

He said the 2.5 million bpd production would be the first time it will be done in the country. According to him, the oil reserves have also grown by over 600 million barrels, rising from 36.18 million barrels to 37.2 million barrels.

But Ebenezer Adurokiya, oil and gas expert doubted if the figure the NPDC is brandishing is correct. He said the reality on ground shows that even what the NPDC is claiming might not correct. According to him, he can’t trust the NPDC figures because this is an election year. “This is an election year so you will hear a lot of figures ahead of the elections so that Nigerians would positively dispose to re-electing the incumbent government in power.

“The truth is that even in the Niger Delta there is no absolute peace in the region. Yes the military has been trying to suppress the people but there is no development in the region. What we have in the Niger Delta now is a relative peace. Is like the militants are waiting to see what will happen before they will know what to do. And there is silent vandalisation of pipelines in the region that the government is not allowing the media to report so that they will not create negative signal or impression in the sector.”