The Organization of Petroleum Exporting Countries (OPEC) and its allies agreed last Wednesday to increase crude production by 100,000 barrels per day (bpd) in September, raising Nigeria’s quota by 0.22 percent.
According to the new production schedule agreed upon at a meeting, Africa’s largest producer’s quota for September will be increased to 1.83 million bpd.
However, Nigeria has struggled to meet previous quotas, and the unwillingness of International Oil Companies (IOCs) to invest in the country’s energy sector on account of rampant crude theft will see the country struggle to meet future quotas.
Independent producers like Heirs Holdings and other local operators are reporting huge losses owing to crude theft, signalling that further production would be crimped if they fail to meet their loan obligations.
Data obtained by BusinessDay from OPEC shows that Nigeria’s oil production increased by 5.6 percent to 1.4 million bpd in January 2022, up from 1.3 million bpd in December 2021.
Though the latest cartel’s report shows a 0.41 percent increment from the month before, the country has had a 12.4 percent decline year-to-date.
Experts attribute the country’s inability to meet production targets to IOCs’ departure from onshore and shallow waters, crude theft, oil infrastructure sabotage, and poor regulatory and fiscal terms.
On Tuesday, at the Nigeria Annual International Conference & Exhibition, Austin Avuru, executive chairman and founder, AA Holdings Limited, blamed low production on the decision of oil majors to abandon their onshore fields.
He said the investment in the industry had dropped from the peak of $22 billion in 2012 to $6 billion in 2021.
“The result of that decline (shortfall of 600,000 barrels per day) in investment is what we are seeing in the decline of our oil production,” he said.
At the Nigeria Oil and Gas conference in Abuja, Mike Sangster, managing director, TotalEnergies EP Nigeria, estimated that crude theft may be costing Nigeria as much as $10 million daily.
He said crude theft had become an organised crime that needed to be curbed.
“That’s a huge loss for the country. So, I think it really needs to be a priority to look beyond the host communities and how we can address the crude safety and eradicate it once and for all,” he said.
Since last year, Nigeria has been unable to meet its output targets. Other OPEC members, including Libya and Angola, are also facing capacity constraints and may be unable to meet agreed-upon output levels.
OPEC, on the other hand, has forged ahead with its plan despite pressure from the US for the cartel to ramp up production to rein in prices above $100 per barrel fueling inflation across the world.
It stated that it will divide the amount proportionally, and with only Saudi Arabia and the United Arab Emirates capable of increasing output, only a portion of it is likely to be delivered.
During the meeting, the oil cartel noted that chronic underinvestment in the oil sector has reduced excess capacity along the value chain.