Nigeria’s oil production slumps as rig count falls
Crude oil production in Nigeria plunged by 185,000 barrels per day to 1.59 million bpd in May, and the operating rig count was cut in half, the latest data obtained from the Organisation of Petroleum Exporting Countries showed.
OPEC and its allies, known as OPEC+, agreed in April to an output cut to offset a slump in demand and prices caused by the coronavirus crisis.
They decided to cut supply by a record 9.7 million bpd for May and June but the deal was extended this month to July.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, had said in April that after the cut, Nigeria would be producing 1.412 million bpd in May and June, in addition to condensate production of between 360,000 and 460,000 bpd exempted from OPEC curtailment.
But OPEC said the country’s production level, based on secondary sources, was 180,000 bpd or about 13 per cent higher than the quota given to it.
The group uses secondary sources to monitor its oil output, but also publishes a table of figures submitted by its member countries. Nigeria did not provide its production figure for May, the report showed.
The number of active oil rigs in the country fell by 50 per cent in May amid the coronavirus-induced collapse in prices and demand for crude.
Data obtained from Baker Hughes Incorporated and the Organisation of Petroleum Exporting Countries showed that Nigeria’s rig count fell to eight in May from 16 in April and 21 in March.
Rig count is largely a reflection of the level of exploration, development and production activities occurring in the oil and gas sector.
The slump in oil prices caused by the coronavirus pandemic has forced many companies, including international oil companies, operating in the Nigerian oil industry to slash their capital budgets and suspend some projects.
In a related development, exports of Liquefied Natural Gas from Nigeria and three other West African producers have shown some resilience, an analysis of S&P Global Platts Analytics data showed on Friday.
Total LNG exports from the four exporting countries in the region — Nigeria, Angola, Equatorial Guinea and Cameroon — so far this year were said to be broadly in line with volumes supplied in the same timeframe last year.
That is despite sharp falls in LNG utilisation rates in other parts of the world, particularly in the US, while spot-exposed Egypt has halted LNG exports altogether.
Nigeria is exposed to the spot market with around 50 per cent of its LNG exports last year sold on a spot or short-term basis, according to an industry group, GIIGNL.
But Nigeria’s LNG exports in 2020 have stayed strong despite weaker demand and low prices, with some 11 Bcm exported in the first five months of the year.
That is down just four per cent on the same period last year.
Some cargoes have taken longer to reach their destinations, while other loaded cargoes have been idling at sea in recent weeks, but nonetheless, exports continue out of the country’s only LNG plant, the 22 million mt/year Nigeria LNG facility.
“With supply to the Nigeria LNG facility being associated gas, LNG exports are to a degree driven by domestic oil production, which Platts Analytics estimates fell by around five per cent over the first five months of the year,” Platts Analytics’ LNG analyst, Luke Cottell, said.
“This meant we saw little change in LNG exports year on year, although a record volume of Nigerian LNG on the water in late May was indicative of the difficulties such cargoes faced in finding a home amid record low prices in both Asia and Europe,” Cottell said.
In the coming months, Nigeria’s oil output may fall as it moves to fully comply with its OPEC+ production quota. As a result, Cottell said, LNG exports are likely to be curtailed in tandem.