Nigerian oil is in trouble. In fact, Nigerian production has declined. According to data from the Nigerian Upstream Petroleum Regulatory Commission, it fell by 6% between June and July 2022. July production was then at about 1.31 million b/d.
The situation is the result of the closure of pipelines, maintenance of the main fields, but also an increase in attacks on oil facilities. Thus, the largest oil producer on the African continent is facing many difficulties since the beginning of 2021.
There are operational, technical and security problems. On the one hand, the field that feeds the Bonny Light is still disturbed. On the other hand, sabotage and theft of pipelines would cost Nigerian oil production nearly 400,000 bpd.
In this context, producers are reducing their investments, which is not likely to reverse the current dynamic.
An unfavorable context for Nigerian oil
The deteriorating security situation in the Niger Delta has exacerbated the situation. Indeed, it is estimated that about one-tenth of the oil pumped in Nigeria is stolen and ends up in illegal refineries. Since mid-March 2022, the situation seems to be getting worse.
There are a significant number of acts of sabotage on the main oil pipelines. In April, however, the explosion of an illegal refinery between the oil-producing states of Rivers and Imo prompted the president to intensify the crackdown.
However, the 150,000 b/d Nembe Creek mainline was recently attacked again. Thus, the situation is not improving and the insecurity in the Niger Delta is hampering growth prospects.
In addition, the political situation does not seem to be conducive to a resolution of the problems. Indeed, the political risks could deteriorate before the elections scheduled for February 2023.
As a reminder, Muhammadu Buhari, the current president, will not be allowed to run for a third term. With seven months to go before the elections, the opposition even won a test election in the stronghold of the presidential majority candidate.
Thus, we are faced with the risk of recomposing the political balance in a country fractured by multiple cleavages. According to Platts Analytics:
“Political risks could worsen ahead of elections in early 2023. Production has averaged about 300,000 b/d below its OPEC+ quota since mid-2021. […] Loadings remain low despite the startup of the Ikike field in July, feeding Amenam loadings.”
Platts Analytics said it expects Nigerian oil supply to rise to 1.5 million b/d in the first quarter of 2023. While OPEC+ has announced an increase in its production quotas, the situation seems complex for Nigeria.
