Pipeline closures, maintenance drag Nigerian oil output to new lows

Nigerian crude oil output has plunged to new lows in recent weeks, hit by pipeline closures and maintenance at major fields, industry sources said June 9.

A senior official from the country's oil ministry told S&P Global Commodity Insights the fields that feeds to two major exports grade -- Bonny Light and Qua Iboe -- were down on maintenance in May but output was "gradually returning".

Other industry sources said the Nembe Creek and Trans Forcados pipelines had repeatedly come under sabotage, and flow through the lines have been sporadic in the past month.

Africa's largest oil producer has had to deal with a barrage of security, operational and technical problems at its key oil infrastructure since early-2021.

Crude and condensate production in May fell 14% month on month to 1.279 million b/d, according to Nigerian Upstream Petroleum Regulatory Commission data.

That was the lowest in more than three decades, according to estimates from S&P Global.

Nigeria has seen its crude and condensate production drop to almost half its production capacity of around 2.2 million b/d.

Key risks

A majority of key oil fields, terminals and facilities have been experiencing teething problems and a recent resurgence in attacks on oil facilities have exacerbated the situation.

Rising pipeline sabotage and insecurity in the Niger Delta were also hampering the growth outlook for Africa's largest oil producer.

In a recent note, Platts Analytics said it expected Nigerian crude supply to rise to 1.5 million b/d from the fourth quarter of 2022 from 1.4 million b/d in April.

"Political risks may worsen ahead of elections in early 2023," Platts Analytics said. "Production has averaged about 300,000 b/d below its OPEC+ quota since mid-2021 due to technical outages, theft and sabotage and force majeure."

The declining oil production comes at a difficult time for Nigeria, which is also fighting a wave of divestments from international oil companies.

The government has had lofty targets to boost exploration and production and increase oil reserves and output to 40 billion barrels and 3 million b/d, respectively, by the mid-2020s. Those targets have started to look unachievable.

Nigerian crude is light and sweet, largely low in sulfur, and yields a generous amount of diesel, gasoline and jet fuel, which are the profit-making products for global refineries.