The Energy Information Administration (EIA), a US agency, has stated that disruptions in Nigeria’s oil production have led to the country no longer being Africa’s highest crude oil producer. Angola has overtaken Nigeria due to unplanned production outages. The EIA report highlights that disruptions remain a significant and persistent downside risk to Nigeria’s crude oil production. Angola’s production output surpassed Nigeria’s in April.
The report explains that Nigeria experienced a sharp drop in crude oil output in the third quarter of 2022 due to the closure of the Trans Niger pipeline and the Forcados export terminal for repairs. Nigeria’s production recovered by the beginning of 2023, but an oil workers’ strike disrupted production again in April 2023. As a result, Nigeria’s crude oil production fell below Angola’s, with Nigeria producing slightly over 1 million barrels per day (b/d) in April, while Angola’s production was estimated at 1.1 million b/d that month.
The EIA report also mentions the steps taken by the Nigerian government to attract oil and natural gas investments. The passage of the Petroleum Industry Act in August 2021 is highlighted as a significant development. The legislation aims to overhaul the legal framework of the hydrocarbon industry, attract investor interest in upstream development, and address the grievances of communities affected by oil extraction. Changes include the creation of two industry regulators, restructuring the national oil company, and modifying terms and conditions for upstream licensing and leasing.
However, the report notes that despite legislative changes, oil theft and sabotage to export infrastructure continue to be major concerns in Nigeria. These disruptions cause production losses and environmental pollution, forcing oil companies to shut down production and limit their ability to export crude oil.
Marketnews Thoughts: The passage of the Petroleum Industry Act in Nigeria is a significant step towards attracting investments and addressing the issues in the hydrocarbon industry’s legal framework. The restructuring of regulatory bodies and modifications to licensing and leasing terms aim to create a more favorable environment for upstream development.
However, the persistent concerns of oil theft and infrastructure sabotage pose ongoing challenges to Nigeria’s oil industry. These disruptions not only affect production and export capabilities but also contribute to environmental pollution. It will be crucial for the Nigerian government to prioritize security measures and collaborate with industry stakeholders to mitigate these risks and create a more stable and sustainable oil sector.
Overall, Nigeria’s oil industry continues to face significant hurdles, and addressing disruptions and security issues will be crucial for the country to regain its position as Africa’s leading crude oil producer and ensure long-term stability in the sector.