30 December 2016, Sweetcrude, Abuja — Nigeria’s average crude oil production dropped by 11.6 percent to 1.6 million barrels per day in the third quarter (Q3) of 2016, according to data released by the Nigerian Extractive Industries Transparency Initiative (NEITI).
NEITI stated this in its latest Occasional Paper Series, with emphasis on the ‘Review of NNPC’s Monthly Financial and Operations Reports.’
According to the report, Nigeria has consistently recorded significant declines in crude oil output since the end of the fourth quarter of 2015.
Specifically, the report disclosed that in the fourth quarter of 2015, Nigeria’s crude oil production rose to an average of 2.17 million barrels per day from an average of 2.15 million barrels in the third quarter of 2015, while it slumped to an average of 2.05 million barrels per day in the first quarter of 2016, representing a decline of 5.5 percent.
Nigeria’s crude oil production dropped further by 11.7 percent in the second quarter of 2016 to an average of 1.81 million barrels per day, while it again slumped by 11.6 per cent to end the third quarter of 2016 at 1.6 million barrels per day.
NEITI stated that the general decline in the levels of production since February 2016 can be attributed to the well-documented militant attacks in the Niger Delta, adding however, that these fluctuations were also noticeable in the period before the onset of militant activity in the region.
“Thus, militant activity alone is not the sole reason for the fall and volatility in crude oil production. This period was characterised by a significant fall in the price of crude oil from over $100 per barrel in July 2014 to less than $50 per barrel since 2015,” NEITI said.
NEITI also argued that based on the fact that the 2016 budget was predicated on daily production of 2.2 million barrels per day, the drastic decline in Nigeria’s crude oil production would have serious implications for the faithful implementation of the country’s budget.
The report noted that crude oil output from Production Sharing Contracts (PSCs) had consistently outstripped production from Joint Ventures (JVs) in the period under review, while it quoted the NNPC as attributed it to the fact that PSCs are mainly deep-water assets, while production from JVs are predominantly from onshore and shallow water locations.
It said, “These onshore and shallow water locations have been severely damaged by militant activities and security breaches. As a result of this, production from PSCs has been relatively stable, between 25 million and 28.7 million barrels per month.
“On the other hand, production from JVs has fluctuated a great deal, between 14.4 million and 24.2 million barrels per month. In addition to militant activities, divestment of Federation equity in some Oil Mining Leases, OMLs, notably from NAOC and SPDC JVs from which NNPC lifted Crude Oil on behalf of NPDC instead of Federation Account, has significantly reduced NNPC’s JV production.”
The report further stated that between January 2015 and August 2016, PSCs contributed between 40 per cent and 53 per cent of total crude oil production; JV’s contribution ranged between 27 per cent and 35 per cent, while Alternative Financing’s (AF) contribution was between 11 per cent and 18 per cent.
On the other hand, the NEITI report noted that Nigerian Petroleum Development Company’s (NPDC) contribution was between two per cent and seven per cent, while Marginal Fields contributed between three per cent and seven per cent.