Nigeria declares oil sector emergency amid efforts to boost production

Nigeria’s state-owned oil company NNPC Ltd has declared a state of emergency over the halt in production across the country’s oil and gas industry, as Africa’s largest oil producer struggles to boost output.

“NNPC believes that Nigeria must take urgent action to address the challenges that have plagued the oil and gas industry for years,” NNPC Group CEO Mele Kyari said at an industry event this week.

Increasing oil production is a key priority for the Nigerian federal government, which aims to increase revenues and foreign exchange reserves.

Oil theft and pipeline vandalism have long plagued Nigeria’s oil and gas industry, forcing major producers to withdraw from the country and often leading to force majeure at major oil export terminals.

A combination of pipeline vandalism and oil theft, along with a lack of investment in production capacity, has made Nigeria the biggest laggard in oil production in the OPEC+ alliance. The shortfall in production even saw OPEC cut Nigeria’s oil production quota last year.

“We have decided to end the debate. We have declared war on the challenges affecting our oil production. War means war. We have the tools. We know what to fight,” Kyari said.

“We know what we need to do at the asset level. We have engaged our partners and we will work together to improve the situation.”

An analysis of Nigeria’s oil and gas reserves has shown that Africa’s largest OPEC producer can easily pump 2 million barrels of crude oil per day (bpd) without having to deploy new drilling rigs, Kyari said.

Nigeria currently produces about 1.5 million barrels of oil per day.

As stated by the NNPC CEO, “the biggest obstacle to achieving this goal remains the inability of players to take action in a timely manner,” the company said.

Nigeria launched a new round of oil and gas licensing in early May, inviting bids for 12 onshore and offshore blocks and promising transparency in the bidding process.

In recent years, international companies have reduced their involvement in the Nigerian energy sector. One of the reasons why the oil majors withdrew investments from their Nigerian assets, apart from oil thefts and frequent pipeline damages, was the transparency of licensing rounds.

By Tsvetan Paraskov for Oilprice.com

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