Nigeria’s crude oil production has experienced a year-on-year decline in the first eight months of 2023, despite significant investments, both official and clandestine, in protecting oil assets in the Niger Delta region. This decline is in contrast to previous years when oil production increased, even during periods with less focus on combatting oil theft.
Analysis of oil output data over the last four years reveals a troubling trend. In 2020, due to the COVID-19 pandemic, Nigeria’s crude oil production slowed to 283.4 million barrels in the first eight months. However, in 2021, production increased significantly to 327.6 million barrels during the same period. Even in 2022, despite reported security breaches, production reached 386.4 million barrels in the first eight months.
However, the data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for the year 2023 shows a dramatic drop in oil production, with only 252.9 million barrels produced in the first eight months. This decline comes after the Nigerian National Petroleum Company Limited (NNPC) awarded contracts for the protection of pipelines and oil assets to non-state actors.
The contracts, which included awarding security contracts to Tompolo’s Tantita and Pipeline Infrastructure Nigeria Limited (PINL), stirred controversy. The NNPC justified the move, citing the need to combat massive oil theft. The actual contract sum, believed to be around N48 billion per year (N4 billion per month), has not been disputed. Additionally, official security agencies, such as the navy, army, airforce, marine police, and paramilitary units, are also funded to address security concerns in the region.
While the move received mixed reactions from regional leaders, data from NUPRC indicates that oil production was more stable when there was less emphasis on combating oil theft. In the years from 2020 to 2022, production steadily increased, but it has now declined significantly in 2023, with a year-on-year decrease of as much as 133.5 million barrels in the first eight months.
Despite efforts by NNPC to monitor oil asset infractions in real-time and reward whistleblowers, month-on-month improvements in oil production have been marginal, and a year-on-year deficit has been recorded.
As a result of continued underproduction, Nigeria’s OPEC quota has been reduced from 1.8 million barrels per day to 1.742 million bpd. The country has struggled to meet this quota, losing up to 560,000 bpd in recent months.
Efforts to secure a $3 billion loan from AfreximBank to address foreign exchange shortages have also stalled, impacting the nation’s currency, the naira, which has been significantly devalued. This is a result of the oil and gas sector’s inability to generate sufficient foreign exchange, as over 90% of Nigeria’s foreign exchange earnings come from this sector.
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