Oil Production Wobbles as Forcados Remains Shut

Crude oil gains
  • Oil Production Wobbles as Forcados Remains Shut

The nation’s crude oil production has remained subdued despite the suspension of militant attacks on oil and gas facilities in the past few months.

The Forcados export terminal, the country’s third largest, has been under force majeure since February 2016, limiting gas supply to power plants and crude oil production and exports.

Since then, the nation’s electricity generation has similarly been unable to come near the peak of 5,074.70 megawatts it achieved on February 2, 2016.

Total power generation, which plunged to a low of 1,400MW on May 17, 2016, stood at 3,109.70MW as of 6:00am on Friday, more than 14 months after the attack on Forcados.

Crude oil production in the country fell to 1.269 million barrels per day in March from 1.426 million bpd in the previous month, according to the latest monthly oil report from the Organisation of Petroleum Exporting Countries.

According to the United States Energy Information Administration, Nigeria’s crude oil production, which peaked at 2.44 million bpd in 2005, fell to 1.9 million bpd last year.

Shell Petroleum Development Company declared the force majeure on the exports of Forcados on February 21, a week after the Forcados export line was attacked by militants in the Niger Delta.

The force majeure is a legal clause that allows the oil major to stop shipments without breaching contracts.

According to the NNPC, at Forcados terminal alone, about 300,000 barrels of oil per day have been shut in since February 2016 following the declaration of the force majeure.

The corporation also said over 1,500MW of power supply was lost to the attack on Forcados, which is Nigeria’s major artery, with gas supply from it accounting for 40 per cent to 50 per cent of gas production in the country.

The country generates most of its electricity from gas-fired power plants, while output from hydro-power plants makes up about 30 per cent of total generation.

FBNQuest analysts headed by Gregory Kronsten, in their Economic Outlook for the second quarter of 2017 released on Friday, described the recent scale of production losses as unprecedented.

They said, “Last year, the losses soared in an upsurge in sabotage and militancy, climbing to 750,000 bpd on occasions. For the uninitiated, we should explain that these huge losses are a combination of artisanal theft and larger criminal operations. A local act of ‘bunkering’ can lead to the closure of a main pipeline and the declaration of force majeure.”

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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