Business Edge | Addressing Nigeria’s Oil Production Loss

Recently, the Organization of Petroleum Exporting Countries held a meeting that is one of the shortest ever held in its history and then agreed to raise the export production quota for its members to 400,000 barrels per day.

A statement by the body after the virtual meeting said the current market fundamentals and consensus on the outlook informed the decision to raise the production quota.

With oil prices maintaining a steady incline and heading towards $100 per barrel, this ideally should be met with excitement by member bodies. However, considering Nigeria’s inability to meet the quota for previous months, there is growing concern that the country may once again miss the newly set target.

On Business Edge, Tolulope Adeleru-Balogun is joined by Bello Tukur, Managing Director Riverlake Nigeria and they delve into what’s at stake for the country’s crude oil production.

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What You Should Know

For months, Nigeria had been requesting an increase in its quota but had been unable to meet its output due to reasons that comprise vandalism, inadequate upstream infrastructure, oil theft, sabotage among others.

Nigeria lost its Africa’s top oil producer status to Libya in January. To compound its woes, Trinity Spirit an oil vessel used to store crude oil of the coast of Nigeria exploded, losing as much as fifty thousand barrels in the ensuing inferno. The total volume it was able to deliver for January was 1.46 million barrels as opposed to the targeted 1.68 million barrels.

According to Tukur, the main cause of Nigeria’s inadequate delivery is vandalism. “It’s simple. We’ve been unable to meet our quota because of pipeline vandalism… About fifteen years ago, there was the amnesty programme for the Niger Delta militants to stop disrupting the crude oil pipeline. Right now, it appears the pipelines are being burst for illegal oil refining.”

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An Expert’s Opinion

These acts of vandalism hurt Nigeria in multiple ways. When these pipelines are burst and oil carted away, oil seeps into the ground and groundwater, causing further ecological damage.

In addition, the vandals also often take away the pipes to resell on the black market. In the nineteen months between January 2019 and September 2020, over one thousand points on the pipelines were vandalized, costing the country 800 billion naira in repairs alone. “The loss really cannot be quantified,” Tukur says.

As Nigeria has not received the increase it asked for, mainly for budgetary reasons, to meet up with the requirement it must repair the pipelines and more importantly find a lasting solution to the unending vandalism crisis. 

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The full episode is in the post above.

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