Nigeria's crude loss above 600,000 barrels

Nigeria, Africa's largest oil producer is currently faced with about 606,500 barrels per day (bpd) of oil shut-in due to sabotage to oil facilities, according to oil companies and trading sources, Reuters reported.

The production losses represent more than 20 per cent of Nigeria's total production capacity of 2.5million bpd.

If the development persists, the country -the world's eighth largest crude exporter- will be losing about $30.55million per day based on Wednesday's trading of crude futures at $50.37 per barrel at the New York Merchantile Exchange.

Aside the production shut-ins, Nigeria also suffers from crude oil theft estimated at about $1.5billion per annum, according to Mutiu Sumonu, Managing Director of Shell Petroleum Development Company.

The United States' Energy Information Administration estimates that from December 2005 to December 2007, "Nigeria has lost an estimated $16 billion in export revenues due to shut-in oil production. Shell has incurred the majority of shut-in oil production (477,000 bbl/d), followed by Chevron (70,000 bbl/d) and Agip (40,000 bbl/d)."

Production shut-ins

In this instance also, Anglo-Dutch Shell, which before the militant attacks in January 2006, was Nigeria's biggest producer, suffers the most losses of about 515,000 bpd due to shut-ins from four of its fields in the country.

Quoting oil traders and company sources, Reuters cited the affected oil fields to include Shell's Bonny Light, which has lost 200,000bpd since February 2009.

The Bonny crude oil terminal is the largest of its kind in Africa, and can process and export up to 1.25 million bpd.

Also, Shell's Forcados field loses 140,000bpd against installed capacity of 380,000 bpd since March 7, 2009 due to the impact of explosions on its pipeline.

The company's entire East Area field has remained shut down with 115,000 bpd in the wake of attacks since February 2006, while Bonga has been losing 60,000 bpd against a capacity of 225,000 bpd from June 2008.

Other fields also experiencing production cutbacks are the Brass River, operated by Italy's Eni; 80,000bpd against 200,000 bpd since February 2009, and Escravos operated by America's Chevron with 11,500 bpd against 350 000 bpd from March 13 2009, due to attacks on the oil pipeline.

Of the six major oil export terminals operated by the Joint venture operations with the state-run Nigerian National Petroleum Corporation (NNPC), only the Qua Iboe, operated by ExxonMobil, the world's biggest oil company by market value, remains unaffected.

It is estimated that actual production shut-ins might be higher than already quoted, as there are isolated cases in other oil fields.

Production losses are higher compared with those experienced about the same period two years ago.

In April 2007, an estimated 587,000 bpd of crude production was shut-in. The majority of shut-in productions are located onshore in the Niger Delta, with the exception of the offshore 115,000 bbl/d EA Platform.

No official confirmation

The NNPC's spokesman, Levi Ajuonuma, declined to comment on the production losses, saying, "I'm not in a position to say anything on that (losses) now."

Shell's spokesman, Tony Okonedo, opted to hide under the company's latest slogan, "We do not provide daily production updates."

Neither the Nigerian oil and gas industry regulator nor the Ministry of Petroleum Resources would provide any assistance. Enquiry messages sent to the telephones of the Acting Director of Department of Petroleum Resources, Billy Agha or the Minster of State, Odein Ajumogobia, were not replied.

Analysts believe that silence from official sources is deliberate and a way of entrenching corruption especially in the oil and gas industry, so that government is not held accountable for operations in the industry.

Anticipated losses

In view of Nigeria's reliance on oil revenues, the NNPC fears a shortfall in revenue by up to 50 per cent. The corporation's Group Managing Director, Mohammed Sanusi Barkindo, was quoted as saying, "in terms of pricing, whereas in 2008, our crude strength averaged $97 per barrel, in the year 2009, as at January, the average basket is hovering around $43 a barrel."

Mr. Bakindo said the decline in daily crude production from two-million barrels per day in 2008 to the current level of 1.6 million barrels per day, is taking a heavy toll on the economy.

He observed that the slowdown in investment in oil and gas production, insecurity in the oil-producing Niger Delta and OPEC quotas are some of the key challenges facing the industry.

Nonetheless, the wires report that Nigeria is unlikely to cut its crude oil production much further, even though it is exceeding its OPEC target, because the country's weakening economy is overwhelmingly reliant on oil revenues.

Nigeria is expected to export 1.81 million barrels per day (bpd) in May, according to trade sources, far above its implied production target of 1.67 million bpd set by the Organization of the Petroleum Exporting Countries.

"Nigeria has already cut production involuntarily because of the problems in the Niger Delta. They probably feel that is enough and if they can produce more then they will," Paul Tossetti, director of oil market analysis at PFC Energy told Reuters.