Africa’s largest oil producer, Nigeria, is dusting off an ambitious plan to double its oil production by 2025, aiming to pump as much as 4 million bpd in six years’ time—a goal that analysts think may be too ambitious for the country to achieve.
OPEC member Nigeria currently pumps around 2.2 million bpd in crude oil and condensate. In March, Nigeria’s crude oil production stood at 1.733 million bpd, up by 11,000 bpd from February, according to OPEC’s secondary sources.
Although the number of militant attacks on oil infrastructure in Africa’s biggest producer has been down over the past two years, oil theft from pipelines is still plaguing facilities and leading to leaks that often force operators to shut down export pipelines for days and weeks, resulting in reduced Nigerian oil exports—and reduced oil income for the government.
According to OPEC figures, the oil and gas sector accounts for about 10 percent of Nigeria’s gross domestic product (GDP), while petroleum export revenues make up nearly 83 percent of the country’s total export revenue.
The revived plan to double oil production in six years may sound great, but according to analysts, the goal is overly ambitious and Nigeria will have a hard time achieving it, also because of security concerns. Those security concerns and the continuous oil theft and resulting oil spills in the Niger Delta have been affecting the operations of oil supermajors like Shell and Exxon. The lingering concern about security is not helping the investment climate in the upstream sector in Nigeria. Related: Russia Says Tainted Oil For Europe Was Deliberately Contaminated
“Nigeria has not met a single production target for at least a decade now, in many cases because of security concerns,” Cheta Nwanze, an analyst with Nigerian firm SBM Intelligence, told Bloomberg.
Therefore, the 4-million-bpd production target could be way too optimistic.
Maikanti Baru, Group Managing Director at the Nigerian National Petroleum Corporation (NNPC), admits that the target is aggressive but appeared certain when he said last week that Nigeria is committed to meeting it.
“For the upstream, we are committed to aggressive production growth, and our target is to achieve a reserve level of 40 billion barrels of crude oil, and producibility of four million barrels of crude oil per day by 2025,” Baru said, as carried by Nigerian outlet The Guardian.
Nigeria’s ambitions in the oil industry extend beyond the upstream. The most populous nation within OPEC also aims to triple its refining capacity to meet growing gasoline demand.
The country will need refining capacity of 1.52 million bpd in order to meet its fuel demand by 2025, NNPC’s Baru said last week.
The reality is that Nigeria currently has operating refineries with a total processing capacity of 445,000 bpd and it often struggles to keep them at full-capacity operation because of underinvestment in maintenance. The country aims to triple the refining capacity by 2025 in order to move closer to becoming self-reliant in fuels. Related: ‘’The Fat Margins Have Disappeared’’ - Big Oil Disappoints
According to NNPC’s Baru, the 650,000-bpd refinery that Africa’s richest man Aliko Dangote is financing will secure most of the refinery capacity increase. However, the refinery could be near its full capacity by the middle of 2020, which would be some one and a half years later than the originally planned startup date.
Nigeria is working with the private sector to add another 450,000 bpd of refining capacity in order to fill in the domestic demand-supply gap, The Guardian quoted Baru as saying.
Nigeria is also looking to OPEC’s largest producer Saudi Arabia to secure potential investments in its downstream sector. This past weekend, Nigeria’s Oil Minister Emmanuel Ibe Kachikwu met with Saudi Energy Minister Khalid al-Falih and said that the top Saudi oil official had expressed “the strong readiness of the Kingdom of Saudi Arabia to sign a definite and high value Memorandum of Understanding (MoU) with Nigeria for oil sector development.”
A possible agreement will open the doors for Nigeria to “potentially benefit from Saudi Arabia’s and effectively, Saudi Aramco’s recent aggressive oil sector investments across the globe while serving as the nerve centre for its presence in Sub-Saharan Africa,” Kachikwu said.
By Tsvetana Paraskova for Oilprice.com
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