Only six of Nigeria’s offshore rigs operational as oil prices near $90

Confirming concerns about Nigeria’s production challenges, the Organization of Petroleum Exporting Countries (OPEC’s) Monthly Oil Market Report (MOMR), published yesterday, showed that oil output remained below quota as the country’s rig count dropped further to six last month.

As oil prices continue to rally, edging closer to $90 a barrel, there are concerns about the country’s capacity to take advantage of higher prices, going by the abysmal production output.

Specifically, the MOMR showed that Nigeria’s production in December, based on direct communication, was lower at 1.19 million barrels per day (mbpd) compared to 1.27mbpd recorded in November. From secondary sources, the country recorded 1.34mbpd last month as against 1.38mbpd the previous month.

Nigeria was expected to produce 1.66 million barrels a day of crude under the OPEC+ agreement for December. Under the new plan, Nigeria is expected to pump 1.7 million barrels a day in February, although lingering challenges may undermine the country’s capacity to meet the target, going by recent performances.

Despite a projected, 1.86 million barrels daily oil production in the country’s 2021 budget, Nigeria recorded a deficit of almost 200 million barrels in the first 11 months of 2021, due to production challenges.

Though Nigeria recorded an increase in production output in November following the lifting of force majeure on crude exports from Bonny Light terminal, the crude oil spill in Nembe creek, Bayelsa State, may have accounted for the further drop in active rigs.

Indeed, the country’s rig count dropped to six from seven recorded in November. As against 10 active rigs in the third quarter of 2021, the number of rigs closed the year at six, exactly the same figure at the beginning of 2021.

Despite the Federal Government’s readiness to pump more oil and increase its acreage, operational setbacks and sabotage from key pipelines continue to undermine optimal production.

Meanwhile, OPEC has left unchanged, its world oil demand growth projections for 2022, near 4.2mn b/d, signalling the prospective impact of the Covid-19 Omicron variant in the first half of the year and ongoing uncertainty over global inflation levels, supply bottlenecks, trade disputes and appetite for transport fuels.

“While the impact of the Omicron variant is projected to be mild and short-lived, uncertainty remains regarding new variants and renewed mobility restrictions, amid an otherwise steady global economic recovery,” the cartel said in its MOMR.

The group puts global oil demand growth at 4.15mn b/d this year, for a total of 100.79mn b/d. It slightly reduced its estimates for demand in the third quarter, to 101.28mn b/d from 101.53mn b/d, and raised its forecast for the fourth quarter to 102.90mn b/d from 102.64mn b/d. US demand will falter slightly in the June-September period before recovering in the final three months of the year when Chinese demand will also edge higher.

OPEC’s estimates for the call on its own crude in 2022 were also flat compared with its last MOMR, near 28.85mn b/d, for a 1.01mn b/d increase from 2021. A 300,000 b/d adjustment to its fourth-quarter projection was offset by a 200,000 b/d downward revision in the third quarter.

On the supply side, OPEC kept its non-OPEC liquids output growth forecast unchanged at 3.02mn b/d in 2022, noting a marginal decline in non-OPEC Africa.


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