Crude Oil: N720bn Lost to Lower Production in Eight weeks – Report
Nigeria lost about N720bn in revenue as a result of the consecutive monthly decline in its crude oil production in February and March 2024.
Also, the country’s inability to ramp up production in these months made it to miss its crude oil production benchmark in the 2024 budget.
Nigeria’s 2024 budget set a crude oil production benchmark of 1.78 million barrels per day. This figure includes condensate along with crude oil.
But data obtained from the latest April 2024 Monthly Oil Market Report of the Organisation of Petroleum Exporting Countries showed that Nigeria’s crude oil production (excluding condensates) witnessed the second consecutive monthly decline since the beginning of this year, as it dropped to 1.231 million barrels per day in March.
OPEC stated that crude oil production details which it got through direct communication from Nigeria showed that the country pumped less oil in March when compared to what was produced in February.
Data from the report indicated that Nigeria produced 1.322 million barrels per day of crude in February this year, but this dropped to 1.231mbpd in March, representing a plunge of 91,000bpd.
The report further stated that the country had produced 1.427mbpd of crude in January, but this was not sustained in February as it dropped in that month, while the southward oil production continued in March.
It was further gathered from the Nigerian Upstream Petroleum Regulatory Commission in Abuja on Sunday that both crude oil and condensates production from Nigeria had yet to reach the benchmark in the 2024 budget.
Data from the NUPRC showed that in January, February and March, the total volumes of crude oil and condensates produced in Nigeria were 1.643mbpd, 1.539mbpd and 1.438mbpd respectively. According to reports, the 2024 budget benchmark for crude oil and condensates production is 1.78mbpd.
N720bn revenue lose
From OPEC’s data, it was discovered that Nigeria lost 105,000 barrels of crude oil daily in February, when compared to the daily crude oil volumes produced in the preceding month of January.
This translates to a total of 3,045,000 barrels for the entire 29 days in the month of February 2024.
The average exchange rate of the United States dollar in February 2024 was N1,383.9, while data from Country Economy, an international website that publishes crude oil prices, put the average cost of Brent, the global benchmark for crude, at $83.48/barrel in the same month.
By losing 3,045,000 barrels of crude in February, it implies that Nigeria lost $254.19m or N351.78bn in that month, going by the average exchange in February.
Further analysis of OPEC’s data indicated that the country lost 91,000 barrels per day in March, which amounts to a total of 2,821,000 barrels for the review month.
The average cost of Brent in March this year was $85.41/barrel, while the average exchange rate in same month was N1,528.3/$.
Since Nigeria lost 2,821,000 barrels of crude oil last month, it means the country’s crude oil earnings dropped by $240.94m. This represents a revenue loss of N368.23bn based on the average exchange rate in March.
Therefore the total volume of crude oil lost during the two-month period is 5,866,000 barrels, while the worth of this crude, based on the analysis above, is N720bn.
When contacted on Sunday to speak on what the government was doing to tackle the plunge in crude oil production, Nneamaka Okafor, Special Assistant on Media and Communications to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, referred our correspondent to the statement of her boss that was issued on Friday.
“The minister explained the reason in the statement that was issued on Friday and that has not changed,” she stated.
Lokpobiri had explained on Friday that the drop in Nigeria’s crude oil production was due to issues encountered on the Trans Niger Pipeline, coupled with maintenance activities carried out by some oil companies operating across the country.
He, however, stated that efforts were on to fix the pipeline, adding that this would enable the country produce up to 1.7 million barrels per day of crude oil and condensates.
The Trans Niger Pipeline is a major oil pipeline in Nigeria that transports crude oil extracted from oil fields in Rivers and Bayelsa states to the Bonny Crude Oil Export Terminal.
It is operated by Shell Petroleum Development Company Joint Venture, with a capacity of about 180,000 barrels of crude oil per day, which is about 15 per cent of Nigeria’s daily output.
The Trans Niger Pipeline is an important part of Nigeria’s oil infrastructure, but it has faced significant challenges in recent years.
Lokpobiri stated that the drop in production was due to issues encountered on the Trans Niger Pipeline, according to the statement issued in Abuja by his media aide.
The statement read in part, “In response to recent concerns regarding a shortfall in oil production in Nigeria during the first quarter of 2024, The Minister of State for Petroleum Resource (Oil), Senator Heineken Lokpobiri, assures (Nigerians) that measures are being taken to address the situation to, not only restore production to previous levels, but to also increase it.
“The minister clarifies that the reported production shortfall was primarily due to issues encountered on the Trans Niger Pipeline, coupled with maintenance activities carried out by some oil companies operating in Nigeria.
“The minister is also pleased to announce that the issues have been adequately addressed, and production is expected to return to its previous levels in the coming days.”
Oil theft and pipeline vandalism have dealt severe blows on Nigeria’s oil production, limiting the country’s output and making it fall below the volume approved for Nigeria by OPEC.
Lokpobiri had also stated that he anticipated that “Nigeria’s oil production, including condensate, which was approximately 1.7 million barrels per day prior to these developments, will soon be restored.”
He also stated that the Federal Ministry of Petroleum Resources was actively engaged in policy evolution aimed at maximising the utilisation of all available wells in Nigeria.
“This strategic approach will enable the country to ramp up production, thereby generating vital revenue to stabilise the nation’s foreign exchange reserves.
“The increased revenue will also empower the government to fulfill its commitments in providing essential infrastructure, as outlined in the 2024 budget,” the statement stated.
