Nigeria’s rig count has been steadily increasing since the last quarter of the previous year, coinciding with a rise in crude oil production driven by aggressive exploration efforts and improved security in the Niger Delta. Opeoluwa Akintayo examines the potential impact of these developments on the country’s economy. Over the past year, Nigeria’s oil rig count has shown a slow but consistent upward trend, with the country adding at least one rig per quarter. An oil rig is a large structure equipped to extract and process petroleum and natural gas from beneath the seabed. According to the Organisation of the Petroleum Exporting Countries (OPEC) Monthly Oil Market Report for January, Nigeria’s rig count rose from nine in the third quarter of last year to 13 in January. This indicates a steady addition of rigs, with counts recorded at nine in Q3 2022, 10 in Q4 2022, 12 in December 2022, and 13 in January 2023.
Between 2019 and 2020, Nigeria’s rig count fell from 16 to 11, and further decreased to seven by the end of 2021, primarily due to increased pipeline vandalism and oil theft in the Niger Delta. However, the trend reversed in early 2022, with the rig count rising to eight in the first quarter, 10 in the second quarter, and 11 by July, following government measures to address pipeline vandalism. Although the count dropped back to nine in Q3 2022, it has since been on a consistent rise. Additionally, Nigeria’s crude oil production has increased from 900,000 barrels per day in Q3 2022 to 1.1 million barrels per day in Q4 2022, reaching 1.2 million barrels per day in December and January, according to OPEC data.
OPEC has reported that the demand for its crude oil in 2023 remains unchanged at 29.8 million barrels per day, approximately 0.9 million barrels per day higher than the 2022 figure. The demand forecast for 2023 has seen slight revisions, with increases of 0.2 million barrels per day for Q2 and 0.1 million barrels per day for Q4, while Q3 was revised down by 0.3 million barrels per day. The first quarter of 2023 remains unchanged compared to the previous month. In comparison to the same quarters in 2022, demand for OPEC crude is expected to rise by 0.5 million barrels per day in Q1 and 0.1 million barrels per day in Q2, with anticipated increases of 1.5 million barrels per day and 1.6 million barrels per day in Q3 and Q4, respectively.
Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), stated during the recent transformation ceremony of NNPC to NNPCL in Abuja that Nigeria is on track to produce 1.8 million barrels per day as assigned by OPEC. The country has struggled to meet OPEC’s production quotas over the past two years due to pipeline vandalism and oil theft. Kyari noted that Nigeria had recently surpassed 1.6 million barrels per day and expressed confidence that the country would soon reach the quota level of 1.8 million barrels per day, which would help restore investor confidence and attract new partnerships. He emphasized that the NNPCL and other stakeholders would focus on increasing production through cost reduction, prudent commercial decisions, and adherence to the Petroleum Industry Act.
During the 13th Global United Arab Emirates Forum in January 2023, Kyari mentioned that Nigeria could achieve 2.2 million barrels per day of crude oil production this year. Reports indicated that international energy firms, including Chevron and its Joint Venture with NNPCL, are in discussions to initiate new drilling operations in Nigeria. They are currently pre-qualifying rig owners for a drilling campaign set to commence in the second quarter. Interested parties were invited to submit bids by November 22, and the deal will be announced once all criteria are met. Additionally, Shell has offered over a dozen turnkey contracts for work in the Niger Delta, with contracts expected to total at least $600 million. This “drill to fill” policy aims to maximize the capacities of existing infrastructure through drilling and development investments.
An investment research firm, Hawilti, has predicted that Nigeria and other leading African producers will experience an upstream revival and launch several multi-well drilling campaigns in 2023, with at least 26 drilling campaigns and rigs expected to be active across Africa this year. Recently, the Federal Government initiated the 2022/2023 mini-bid round process in accordance with the Petroleum Industry Act 2021. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) stated that this mini-bid round aims to stimulate new oil exploration and drilling activities in Nigeria’s deep waters. NUPRC Chief Executive Gbenga Komolafe emphasized that the mini-bid round would be managed in compliance with the PIA and would attract global investors with the capability to operate in deepwater environments.
Komolafe noted that the mini-bid round seeks to build on the successes of the last bid round held in April 2007, which offered 45 blocks from various regions, including the Niger Delta Continental Shelf and Deep Offshore. TotalEnergies is also set to conduct deep-water drilling through its planned infill drilling campaign on OML 130. NNPCL has projected that Nigeria’s oil production may average 2.2 million barrels per day, including condensate, in 2023. As the country experiences increasing rig counts and crude production, the price of its crude grade, Bonny Light, has risen from $80 per barrel in December to $82 per barrel in January, according to OPEC data. These developments are expected to lead to a steady increase in revenue for Nigeria, whose 2023 budget is approximately N22 trillion.
Despite the reliance on crude oil, which accounts for 80 percent of Nigeria’s total trade, Akpan Ekpo, a Professor of Economics and Public Policy at the University of Uyo, has advised that the country should seek to diversify its revenue sources. Ayodele Oni, a lawyer advising NNPC Ltd on oil and gas projects, urged the Federal Government to implement solutions to address the challenges of oil theft to foster growth. He emphasized the need for proactive measures to prevent crude theft, suggesting that many companies are already exploring alternative methods for transporting crude to export terminals. Increasing crude sales during a time of rising international prices could significantly benefit Nigeria’s revenue, balance of trade, and payment.
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