Nigeria’s struggle to boost oil output good for Opec
Nigeria’s progress in curbing militant attacks has not boosted its oil output much and, while that is bad news for a country mired in its worst economic slump in 25 years, it is making life easier for fellow Organisation of Petroleum Exporting Countries (Opec) members.
Africa’s largest economy was pumping about 1.5-million barrels a day in January, 30% below what it was hoping to achieve and only a modest recovery from an almost 30year low of 1.4-million in August.
While peace efforts have curbed the frequency of attacks in the oil-rich Niger River delta, the Forcados export terminal, the country’s third largest, remains closed and shipments are down at many others.
If these disruptions persist they could have an unintended consequence: helping Opec boost oil prices.
“Bringing the Forcados loading terminal back into action is key for Nigeria’s exports,” said Charles Swabey, an oil and gas analyst at BMI Research.
If the government followed through on the peace process, then Nigeria could become “a drag” on Opec’s push to rebalance the market, Swabey said, “and will likely slow the process down”.
When Opec and 11 other producers forged an accord in December 2016 to reduce their production to eliminate a global oversupply, conflict-prone Nigeria and Libya were exempt. So a significant production increase from either nation would make it harder for the group to fulfil its pledge to reduce output by almost 4%.
Amid signs that US output is recovering and prices stalled in the mid-$50 a barrel, Opec can ill afford to have its own members diluting its historic deal.
Global benchmark Brent was trading $54.74 a barrel, down 0.6%, as of 11am London time on Wednesday.
PEACE DIVIDEND
Since the start of negotiations in November 2016 with militants — most of whom call themselves the Niger Delta Avengers — Nigeria’s Minister of State for Petroleum Resources Emmanuel Kachikwu has said there would be a peace dividend in terms of improved oil production. In November, the minister was targeting output of 2.2-million barrels by the end of 2016.
In reality, many of the country’s largest export terminals are experiencing disruptions. Kachikwu predicted that Forcados, which shut down in February, would restart in June, then September, then October.
There was currently “no update” on when the facility could resume operations, said Precious Okolobo, a Lagosbased spokesman for operator Royal Dutch Shell.
Exxon Mobil said Qua Iboe, the nation’s largest crude stream, was still operating at reduced capacity as repairs were being completed to damage on its pipeline.