Why does oil production decline in Nigeria in 10 years?  - energy

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  • Oil production in Nigeria has fallen by 40% over the last 10 years.
  • Lack of infrastructure maintenance and efficiency is the main reason for the decline.
  • Decreased oil production affected gas flaring rates by 25%.
  • Support in light of reduced production has reinforced Abuja’s lack of benefit from higher international prices.
  • OPEC raised Nigeria’s quota for May despite its 2021 production decline.

Nigeria’s oil production has declined, both in relation to last year’s rates, and over the past 10 years, at a time when the Organization of the Petroleum Exporting Countries raised its estimates for Abuja production this month.

The oil sector in Nigeria suffers from internal factors, in addition to external factors. The most prominent of them came in the repercussions of the Russian invasion of Ukraine on the oil markets, as well as the failure to allocate an appropriate amount of spending to rehabilitate the infrastructure internally.

Through two reports, the Washington-based World Bank analyzed the reasons for the sector’s production decline, as well as its impact on other energy sectors.

Oil production in Nigeria until 2021

Oil production in Nigeria recorded, during the period from 2012 to 2021, a decrease of 40%, according to data contained in the two World Bank reports on the repercussions of the invasion of Ukraine and global burning rates, and the local newspaper “Punch” quoted excerpts from them.

Oil production in Nigeria
An oil refinery in Nigeria – Photo (theheritagetimes)

The low production rates not only affected the oil sector, but also cast a shadow on gas and the intensity of its burning. During the mentioned 10 years, gas flaring rates decreased by 25% from 9.6 billion cubic meters to 6.6 billion cubic meters.

The World Bank report monitored Abuja topping the list of the largest oil-producing countries that suffer from a production deficit at the present time. The daily oil production in Nigeria recorded a deficit of nearly 500,000 barrels, compared to a daily deficit of 300,000 barrels for Angola and Russia.

In addition to the decline in oil production in Nigeria over the past 10 years, internal and external reasons combined to reinforce the continuation of the decline rates during the past 2021.

What are the reasons?

The two World Bank reports identified some of the reasons for the decline in oil production in Nigeria, noting that the lack of maintenance and the loss of infrastructure efficiency were among the main reasons for the decline last year.

The decline in domestic production, along with the continuation of fuel subsidies, reinforced the failure of the oil sector in Nigeria to achieve the expected benefit due to the rise in oil prices to record levels by the end of last year, with the escalation of Russian-Ukrainian conflicts and fears of shortage of supplies.

And caused the stability of gasoline prices offered to citizens locally in Nigeria in light of the rise in international fuel prices to increase the cost of subsidies provided by the government.

The World Bank attributed the decline in oil production in Nigeria, which topped the list of oil-producing countries with a production deficit, to the oil sector’s exposure to “sabotage” factors and a lack of investment, as well as the failure to achieve a full recovery from the repercussions of the Corona pandemic.

Meanwhile, after observing low production rates, the Nigerian government made it clear that the “energy transition” would bring good returns to both Abuja and African countries.

Nigeria's Crude Oil Production - February 2022

Nigeria and OPEC quotas

The Organization of Petroleum Producing Countries “OPEC” raised the quota of oil production in Nigeria to 1.753 million barrels per day during the month of May, an increase from last month’s quota, estimated at 1.735 million barrels per day.

The optimistic quotas of oil production in Nigeria, offered by OPEC, came despite the organization’s data confirming a decline in production last year; Production decreased by 744,000 barrels in March of last year.

In addition, March 2021 recorded a decline in oil production of 24,000 barrels per day, bringing total production down from 1.378 million barrels per day in February to 1.354 million barrels in the following month.

The decline in oil production rates in Nigeria – along with Angola – was behind the pumping of the Organization of the Petroleum Exporting Countries and its allies from abroad “OPEC +” less than their planned rates in March.

In turn, the Secretary-General of the Organization of the Petroleum Exporting Countries, Muhammad Barkindo, attributed the reasons for OPEC’s failure to meet the targeted pumping rates in the same month to the lack of sector investments that have been going on for years, citing contraction rates that reached 25% in 2015 and 2016.

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