By Emeka Anaeto, Business Editor, Udeme Akpan, Energy Editor, and Peter Egwuatu, Asst Business Editor
There are indications that Nigeria’s economy is reversing back to oil-sector led development while the gains made in non-oil sector is now reversing.
But feelers from the Organisation of Petroleum Exporting Countries, OPEC, have indicated that a fresh challenge to the nation’s new strength in the crude oil sector has started emerging.
Vanguard’s findings across performance benchmarks showing signs of rebound in the sector includes rising rig count, recoveries in several oil terminals, opening up of new oil wells as well as stable export prices.
Average rig count, an index of measuring activities in the upstream sector, rose year-on-year, YoY by 62 per cent to 15 between June and October 2023, compared to nine recorded in the corresponding period of 2022.
A month-on-month breakdown of the data compiled by OPEC for five months period covering June – October 2023 put Nigeria’s rig count at 16, 14, 18, 15 and 13 in June, July, August, September and October 2023, respectively.
This shows a significant improvement compared to the 11, 11, 10, 7 and 8, recorded in June, July, August, September and October 2022, respectively.
The organization did not specify the driving factors, but checks by Vanguard pointed to the continued positive response of stakeholders, especially investors to Nigeria in the post-Petroleum Industry Act, PIA regime.
The PIA, a comprehensive legislation was signed into law by former President Muhammadu Buhari to bring about restructuring and repositioning of the oil and gas industry for new investments while enhancing transparency and accountability.
Oil production rises to 1.4m bpd
The nation’s oil output has recorded a huge rise by over 40 percent from the low base of below one million barrels per day (mbpd) last year to 1.45 mbpd in October 2023.
This means that when condensate, which Nigeria can produce between 300,000 bpd and 400,000 bpd is considered, the nation’s total output would be more than 1.6 million bpd.
Based on the data from Nigerian Upstream Petroleum Regulatory Commission (NUPRC), major oil terminals performed strongly in the third quarter of 2023, Q3:2023.
Specifically, Forcados terminal recorded a massive 6,028.5% YoY rise just as Bonny terminal recorded 1,875.7% rise, while Brass recorded 245.5% rise and Escravos rose by 24.0%).
All other terminals reported uptick in production for the first time in recent years.
Impact of Nembe crude
Checks by Vanguard indicated that the nation’s total oil output has been impacted by the recommencement of production and export of Nembe crude by the NNPC/ Aiteo Joint venture.
The Nembe Crude Oil Blend, produced by Aiteo, the operator of the NNPC/Aiteo Oil Mining Lease, OML 29 Joint Venture, JV, was disclosed at the just-concluded Argus European Crude Conference in London.
The OML 29, acquired from Shell in 2014 was previously blended with the popular Bonny Light grade and exported via the Bonny Oil & Gas Terminal.
Already, two cargoes of 950,000 barrels each of the Nembe Crude Oil grade have since been exported to France and the Netherlands, thus signaling the beginning of activities at the Nembe Crude Oil Export Terminal, NCOET, which was licensed in line with the extant laws and Crude Oil Terminal establishment regulations.
Europe gasps for Nigeria’s oil
Executive Director, Crude & Condensate, Maryamu Idris, NNPC Trading Limited, said in a panel presentation at the just-concluded Argus European Crude Conference in London that the Nigerian crude flow to Europe has increased in a bid to fill supply gaps left by the ban on Russian crude.
She pointed out that six months before the Ukraine war, 678,000 bpd of Nigerian crude grades went to Europe, compared to 710,000 bpd six months later and 730,000 bpd so far this year.
According to her, “This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners. Several Nigerian distillate-rich grades have become a steady preference for many European refiners, given the absence of Russian Urals and diesel. Forcados Blend, Escravos Light, Bonga, and Egina appear to be the most popular, and our latest addition — Nembe Crude – fits well into this basket. This was a strong factor behind our choice of London and the Argus European Crude Conference as the most ideal launch hub for the grade.”
According to her, NNPC Limited has secured vital partnerships with notable financial institutions to promote upstream investments to restore and sustainably grow production capacity in the coming years.
Analysts’ insights.
Giving their perspectives on the impact of the development in the oil sector, analysts at Afrinvest West Africa, a Lagos based investment house, stated: ”Following expectations of a continued increase in oil production, we anticipate the oil sector would play a larger role in contributing to the overall real GDP for the full year of 2023.
”Also, ramping up oil productions to levels around 1.8mbpds would position Nigeria to capitalize on potential exchange rate revaluation gains from crude oil sales”.
Also commenting, economists at CardinalStone Capital, another Lagos based finance and investment firm, stated: ”Looking ahead, we expect the oil sector to exit a recession in Q4’23, as we anticipate a sustained improvement in oil production, settling at 1.50mbpd”.
”Higher oil output translated to improved quarter-on-quarter, QoQ, GDP performance of 2.6%.”
Non-oil sector reverses trend.
But while the oil sector is recording massive rebound, growth in non-sector has reversed.
SOURCE: VANGUARD
