Nigeria Grapples with Oil Theft Amidst Surging Oil Prices
Amidst a global surge in oil prices reaching an impressive $92.28 per barrel, Nigeria finds itself unable to fully harness this financial windfall due to a persistent issue – oil theft.
Brent Crude, which was trading at $91 just a day before, saw a significant boost, courtesy of Saudi Arabia and Russia’s renewed commitment to cut their oil output by an additional 1.3 million barrels until year-end.
While data from OPEC indicates a modest uptick in Nigeria’s oil production in August, rising from 1 million barrels per day (b/d) in July to 1.1 million b/d, the Nigerian Upstream Petroleum Regulatory Commission presents a more optimistic outlook, pegging August production at 1.4 million b/d, inclusive of 400,000 b/d of condensate.
Despite its substantial 38 billion barrels of estimated oil reserves, Nigeria grapples with a chronic issue – crude oil theft. A staggering 400,000 barrels of oil are lost daily, according to National Security Adviser Nuhu Ribadu.
To put this in perspective, Nigeria’s oil production soared to 1.5 million b/d in March, only to plummet to a mere 1.004 million b/d in April due to rampant oil theft.
This setback has left Nigeria unable to meet its OPEC production quota of 1.7 million b/d, despite a 2023 budget benchmark of 1.69 million b/d. The nation’s finances have suffered as it heavily relies on crude oil exports, constituting roughly 80 percent of government revenue and over 90 percent of foreign exchange.
With the removal of petrol subsidies and the local currency’s floating, Nigeria’s inflation rate surged to an 18-year high of 24.1 percent in July, up from 22.8 percent the previous month.
Furthermore, Nigeria’s oil sector grapples with dwindling investments, as major oil companies pivot toward cleaner, more sustainable energy sources.
This unfortunate confluence of challenges has cost Nigeria its status as Africa’s largest oil producer. Libya edged ahead, producing 1.19 million b/d in August, narrowly surpassing Nigeria’s 1.18 million b/d. Other prominent African oil producers for that month included Angola (1.12 million b/d) and Algeria (939,000 b/d).
Felix Obike, Chairman of the Society of Petroleum Engineers Nigeria Council, emphasizes the critical need for securing pipelines. Despite ongoing exploration efforts, many oil firms hesitate to transport their crude oil for exports due to persistent security concerns.
As Nigeria grapples with these multifaceted challenges, the nation’s ability to fully capitalize on surging oil prices remains uncertain. The ramifications extend beyond the energy sector, impacting the broader economy.
