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Nigeria’s Oil Industry Faces An Existential Risk

Oil Industry

Nigeria risks disruption in oil and gas supplies and power generation, due to declining exploration activity and depleting oil reserves, the Nigerian Association of Petroleum Explorationists (NAPE) has warned.

Inefficient contract and procurement awarding process, oil theft, and illegal refining are the key obstacles to Nigeria’s oil and gas industry, Ajibola Oyebamiji, president of NAPE, said at a press conference, as carried by news outlet This Day. Oil theft and illegal refining are larger threats to Nigeria’s oil industry than a decline in oil prices, according to Oyebamiji.

The procurement and contracting cycles in Nigeria are around 36 months on average—the longest and most inefficient globally, dampening business climate because contractors can’t properly plan costs, NAPE’s president said.

“Insecurity, oil theft and illegal refining are bigger threats to the oil and gas industry in Nigeria than the declining price of oil,” the head of the oil exploration association noted.

Earlier this month, the Nigerian National Petroleum Corporation (NNPC) raised the alarm that oil pipeline vandalism in Nigeria is soaring, with the number of incidents of breached pipelines surging by 115 percent in July compared to June.  

Related: Oil Pirates: The Gulf Of Mexico’s Billion Dollar Problem

Pipeline vandalism, as well as pipeline sabotages by militants in Nigeria’s oil-rich Niger Delta area, has plagued Nigeria’s oil production and exports for years. Over the past year and a half, militant activity has subsided, allowing Nigeria to boost its crude oil production, and also making Africa’s largest oil producer a full-fledged participant in the production cuts of the OPEC+ coalition.

But since it became part of the pact in January 2019, Nigeria has been one of the largest overproducers and non-compliant OPEC members in the deal. Nigeria pledged in September to fall within its respective cap while the cartel and its allies are trying to rebalance the oil market. Nigeria may face an easier task to finally fall in line with its share of the OPEC+ production cuts after OPEC has recently raised the African producer’s oil output ceiling.    

By Tsvetana Paraskova for Oilprice.com

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