“Nigeria’s struggle to up its production capacity also mirrors the impact of OPEC+ on the country’s oil facilities”
By Teddy Nwanunobi
Nigeria’s seeming loss of its most priced natural resource, crude oil, continued in July, with the loss of 7.193 million barrels of oil to mainly deteriorating facilities at the country’s offshore and shallow waters assets.
The loss, by the official exchange rate of N410 to $1, translates to about N221 billion or $539.4 million.
It was the highest loss in months, mostly as a result of shut-ins due to incessant repairs, as well as to a lesser extent, disruptions arising from community workers’ protests and fire incidents.
At a time Nigeria desperately needed every dollar, the continued monthly losses were seen as a direct leakage on the country’s economy.
Delayed maintenance and low investment have combined to ensure that the country has been unable to pump enough oil to meet the quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC) in the last four months.
The loss in July was the complete wipe-out of a little short of five full days at the current production level of roughly 1.5 million barrels per day, excluding condensates, data from the Nigerian National Petroleum Corporation (NNPC) latest presentation to the Federal Accounts Allocation Committee (FAAC) had indicated.
In addition, to put it in proper context, at 158.9 litres of petrol derivable from a barrel of crude oil, the 7.1 million barrels lost to the incidences in the month under review could have produced 11.123 billion litres of petrol which can feed Nigeria’s petrol demand of roughly 1.8 billion for months.
Experts predicted that Nigeria may not be able to return to at least its pre-pandemic levels when it drilled up to 2 million barrels daily, until the first half of 2022.
However, the Minister of State Petroleum, Chief Timipre Sylva, and the Group Managing Director (GMD) of the NNPC, Mallam Mele Kyari, recently disagreed, projecting that by the end of October or mid-November things would return to normal.
Waning investment and nagging maintenance problems continued to hobble Nigeria’s output as a consequence of several shutdowns, with July share of the disruptions amounting to at least 40 incidents.
However, Nigeria’s struggle to up its production capacity also mirrors the impact of OPEC+ on the country’s oil facilities, some of which were shut down in 2020 due to production curb by the cartel, to support prices when COVID-19 hit demand.
Kyari recently said the compulsory closure of the wells was affecting production, maintaining that it was difficult getting them back on-stream due to the complexity of operating the facilities.
The problems range from unserviceable wells to replacing valves, pumps and pipeline sections.
Five onshore export terminals run by oil majors, which typically export around 900,000 bpd, handled 20 per cent less oil in July than the same time last year, despite relaxed quotas, according to analysis shared with Reuters from consultancy Hawilti Ltd, last week.
The decline indicates lower production from all the onshore fields that feed these terminals.
Only French oil major TotalEnergies’ new deep offshore oilfield and export terminal Egina, had been able to quickly turn the taps back on, according to Hawilti, citing an analysis based on data from the Department of Petroleum Resources (DPR).
A breakdown of the incidents leading to shutdowns showed that the biggest loss came from Forcados terminal with a whopping 1.891 million barrels’ shut-ins for the month of July.
The Forcados terminal which is the major trunk line in the Forcados pipeline system and also the second largest network in the Niger Delta after the Bonny oil pipeline system, at the last updated data, exports about 250,000 barrels of crude oil daily from the country.
A further analysis showed that the disruptions from the Forcados terminal happened at 10 points in the facility, including the shutdown of Aroh to manage tank top, leading to loss of 35,000 barrels, shutdown of Seplat facility due to a fire incident, resulting in loss of 140,000 barrels.
Similarly, 80,000 barrels were shed by the NNPC and partners at the injection into Trans-Forcados pipeline which was suspended because of a fire incident as well as shutdown of Trans-Ramos for maintenance and a two-day shut-in at the same facility.
The shut-ins that happened at Batan station due to maintenance works, Aroh for top tank top issues, and another incident at Batan due to a failed surge vessel transmitter led to 138,000 barrels’ loss.
Also, at the Atan terminal, there were three incidents that led to deferment as a result of high gas to oil ratio, Moni Pulo production was shut-in for valve leak repairs, among others, resulting in ultimate loss of 1.095 million barrels.
The story was not different at the Bony terminal, Sea eagle facility, Usan, Brass, Yoho, Qua Iboe, Excravos, Akpo, Ajapa, Otakikpo, Pennington and Ima terminals for various reasons, including demonstrations by aggrieved community workers, which led to a shut-in of 675,000 barrels at the Forcados terminal at some point in July.