Nigeria to average 1.8m bpd crude oil output in 2017

Analysts at Ecobank have forecasted that Nigeria’s average oil output will be 1.8m barrels per day in 2017 up by thirteen per cent from the 2016 averages.

According to the bank’s analysts, three key factors are likely to affect Nigeria’s output in 2017 are militancy, low level of additional oil coming from new projects and the natural rate of field decline in most of Nigeria’s large fields.

“First is the militant activity in the Niger Delta. Already the major militant groups have announced plans to commence another round of disruptions to oil production if the government doesn’t hasten to dialogue with their representatives or with them directly,” said the report obtained by BusinessDay.

It further said, “Another round of disruption to oil facilities could be very damaging for the country, which now has lower oil revenues with which to fix these damages and address these issues.”

Between January and October 2016, Nigeria lost 130 million barrels of crude worth about N3trillion or almost half 2016 budget using estimates of $50 per barrel and exchange rage of N470/$.

Shina Bankole, general manager, security Chevron Nigeria Ltd, stated this in a speech on addressing the burden of securing the Nigerian Oil & Gas industry at the plenary session of an oil and gas health and safety conference taking place in Lagos on November 28 last year.

“As at today, 58 incidents of sabotage have been recorded in the Niger Delta wherein assets and facilities belonging to oil and gas companies have been vandalised, and about 130million barrels of crude have been lost due to inability of oil and gas companies to produce as a result of attacks,” Bankole said.

Ecobank Energy research team also says that the second factor that will impact production this year is the low level of additional oil coming from new projects.

“There are a few projects, which are expected to add some volumes to Nigeria’s oil output in 2017. These include Chevron’s Sonam (mostly gas), Shell’s Gbaran Ubie Phase 2, Aje oil field offshore Lagos, Lekoil’s Otakikpo, Eroton’s OML18 among others.”

“However, these are likely to add just over 100,000 bpd of new oil output to the country’s output in 2017. The larger projects such as Egina, which is expected to add over 200,000 bpd, are expected from 2018.”

Already oil majors have not demonstrated a keenness to include projects from Nigeria in their spending plan for 2017.

Nigeria was conspicuously absent from Chevron Corporation’s $19.8 billion capital and exploratory investments program for 2017.

Chevron priotised projects from Permian Basin developments in Texas and New Mexico (United States), Australia and Kazakhstan.

“It is easy to know that if the investment climate is uncertain, you still have the PIB which is now the PIGB and we have been on it back and forth, when oil price was a $100 per barrel, many investors can cope with the uncertainty because the margins were high so now if your margin is very low and government is creating uncertainty and there is crises in the Niger Delta why would you want to put your money in a country where there is so much risks?” said Taiwo Oyedele, PwC Head of Tax.

Another reason advanced by Ecobank energy research team for forecast is that natural rate of field decline in most of Nigerian large fields continues unabated.

“Although the exit from the JV cash call could see this development addressed however other factors will determine the pace at which this happens. Holding the level of output disruption constant as in 2016, we estimate the country’s production at 1.8mbd, factoring in output from new fields,” the report said.