Nigeria’s inability to meet its 1.54 oil production OPEC quota in the past few months has been blamed on huge cost of restarting fields and ongoing pipeline vandalism in the Niger Delta.
OPEC had last week reported that Nigeria produced 1.23mb/day in August, a major drop from the 1.32mb/day produced in July. Nigeria quota based on the agreement reached by OPEC and its allies to raise production by 400,000b/day, is set to be 1.6mb/day.
Speaking to Vanguard on Wednesday in a telephone interview, energy expert and former head of British funded Facility for Oil Sector Transparency and Reform (FOSTER), Mr. Henry Adigun said huge cost of restarting a field, instability in fiscal terms and vandalism were responsible for Nigeria’s low production level in the past.
Mr. Adigun was however optimistic that with stable oil price and fiscal terms, production would improve in September.
According to him, “The challenge is that if you shutdown most of the operations, restarting them is not straight forward. Our rig count was five a few months back and as at last week we were at eleven, so we have moved. A lot of factors affect rig count.
“One is price of oil in the market. When oil price is not very good and you shutdown, it takes a lot of cost to recover. If you look at the cost and it doesn’t look good on your balance sheet then you don’t recover. In the last few weeks we restarted about three fields.
“The other issue is the damage and vandalism that is going on around. The level of vandalism is very high and it is under-reported. Agip, Shell and some other companies have suffered serious damages in their areas, limiting their ability to contribute to production, this has led to shutdowns”, he stated.
He expressed optimism that future report would show increased production, projecting that Nigeria may be able to produce about 1.4mb/day in September.
“The good thing is that (with the Petroleum Industry Act) the fiscals are now out, so people now understand longer term planning, and can actually do better than they could do before when it was hazy.
“The key thing is that the environment about three months ago was not stable enough to get companies to restart production. So when the Department of Petroleum Resources (DPR) allocates you 40,000 barrels or 30,000 barrels and then you have capacity, restarting a facility cost money”.
He also noted that Nigeria’s plan to hit over two million barrels per day production level by next “is also feasible because rig count is now eleven as at last Friday. The next report you will see, we will be doing at least 1.48/1.49mbp/day”.
He added that with oil price stabilizing and the fiscals known, Nigeria will in about nine month’s time attain 2.2mb/day production level with condensate.