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Rising oil production may boost FG revenue

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By Abraham Adekunle

Aggressive exploration and improved security have an impact on economy.

Nigeria is an oil-producing country and a member of the Organization of the Petroleum Exporting Countries (OPEC). This is not novel information, but what is relevant is that Nigeria earns majority of its Revenue from the sale of crude oil that is extracted from the Niger Delta region. So, whatever happens in that axis has a profound effect on Nigeria’s Economy. In an infamous widespread record, Nigeria’s crude oil production fell below one million barrels per day in August 2022. This was a 32-year low as the country battled rampant theft from its pipelines.

This did not only affect Nigeria’s revenue but the economy also took a severe hit because of it. However, Nigeria’s oil rig count has been growing since the last quarter of 2022. Crude oil production has been on the rise as a result of aggressive exploration and improved Security in the Niger Delta region. The upward trajectory of the country’s rig count may be at a slow rate, but the country has added at least one rig per year.

OPEC data showed significant improvement in output.

An oil rig is a large structure with facilities to extract and process petroleum and Natural Gas that lie in rock formations beneath the seabed. In the newly released OPEC Monthly Oil Market Report for January 2023, Nigeria’s rig count rose from nine in the third quarter of 2022 to 13 in January 2023. In other words, a minimum of one rig was added in each quarter. According to OPEC data, the rig count stood at nine in the third quarter of 2022, 10 in the fourth quarter, 12 in December 2022, and then 13 as of January 2023.

Because of Insecurity and other factors, the country’s rig count declined from 16 to 11 between 2019 and 2020. It further decreased to seven in the year 2021 due to Pipeline vandalism and Oil Theft in the Niger Delta region. However, the trend reversed in the first quarter of 2022. It increased to eight, 10 by second quarter, and 11 by July 2022 when the government finally put measures in place to tackle the challenges of pipeline vandalism. Meanwhile, the count again dropped to nine in the third quarter of 2022. But after this, it has been on a consistent rise. The country’s crude oil production record also showed that output has picked up from 900,000 barrels per day (bpd) in third quarter of 2022 to 1.1mbpd in the fourth quarter of 2022. The country produced 1.2mbpd in December 2022 and January 2023 according to OPEC sources.

Nigeria is on its way to producing 1.8bpd as OPEC assigned.

For the past two years, Nigeria has failed to meet up with OPEC’s production quotas due to vandalism of the country’s pipelines and oil theft. But OPEC has said that demand for its crude in 2023 remained unchanged from the previous MOMR to stand at 29.8mbpd, which is around 0.9 mbpd higher than the 2022 figure. Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari, during the official cutover ceremony for transforming NNPC to NNPCL in Abuja recently said that the country was on its way to producing 1.8mb/d of crude oil as assigned by OPEC.

He said, “As of yesterday, we had crossed 1.6 million barrels per day. This is not rocket science. We have a line of sight to recover to the quota level of 1.8 million barrels per day.” He said that he knew it was not far away. In probably two to three months maximum, Nigeria will reach the target and will bring back partners to invest. He said Nigeria will return the confidence of its Investors and ultimately bring back growth.

Kyari said Nigeria can achieve 2.2mbpd crude oil production in 2023.

According to him, the NNPCL and other stakeholders will work to achieve the goal of increased crude oil by ensuring cost reduction, increased production, being prudent in commercial decisions, fairness to stakeholders, and adherence to the provisions of the Petroleum Industry Act. Also, during the 13th Global United Arab Emirates forum held in January 2023, Kyari said Nigeria could achieve 2.2mbpd of crude oil production in 2023. This is after the press had in January reported how international energy firms such as Chevron and its Joint Venture and NNPCL were in talks to undertake fresh drilling operations in one of their core assets in Nigeria.


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