How rising oil production may boost FG revenue target

Nigeria’s oil rig count has maintained an upward trajectory in the last one year, although at a slow rate. However, the cheering news is that the country has consistently added at least one rig per year.

An oil rig is a large structure with facilities to extract, and process petroleum and natural gas that lie in rock formations beneath the seabed.

In the Organisation of the Petroleum Exporting Countries newly released Monthly Oil Market Report for January, the country’s rig count rose nine in the third quarter of last year to 13 in January. It means a minimum of one rig was added in each quarter.

It stood at nine as of Q3/2022, 10 in Q4/2022, 12 in December 2022, and 13 as of January this year, according to OPEC data.

Between 2019 and 2020, the country’s rig count declined from 16 to 11 and further decreased to seven at the end of the following year, due to increased pipeline vandalism and oil theft in the Niger Delta region of the country.

However, the trend reversed in the first quarter of 2022, increasing to eight, 10 by second quarter and 11 by July 2022, when the government put measures in place to tackle the challenge of pipeline vandalism. It, meanwhile, again dropped to nine in Q3/2022. But after this, it has been on a consistent rise.

A check on the country’s crude oil production also showed that output has picked up from 900, 000 barrels per day in Q3/2022 to 1.1mb/d in Q4/2022. The country produced 1.2mb/d in December and January, according to OPEC data quoting direct sources.

OPEC has said demand for its crude in 2023 remained unchanged from the previous MOMR to stand at 29.8 mb/d, which is around 0.9 mb/d higher than the 2022 figure.

Compared with the previous assessment, 2Q23 and 4Q23 were revised up by 0.2 mb/d and 0.1 mb/d, respectively, while 3Q22 was revised down by 0.3 mb/d.

Meanwhile, 1Q23 remained unchanged compared with the previous month. Also, compared with the same quarters in 2022, demand for OPEC crude in 1Q23 and 2Q22 were forecast to be 0.5 mb/d and 0.1 mb higher, respectively, while 3Q23 and 4Q23 are expected to be higher by 1.5 mb/d and 1.6 mb/d, respectively.

Group Chief Executive Officer, the Nigerian National Petroleum Company Limited, Mele Kyari had during the official cutover ceremony for transforming NNPC to NNPCL in Abuja recently, said that the country was on its way to producing 1.8mb/d of crude oil as assigned by OPEC.

The country had for the past two years, failed to meet up with OPEC’s production quotas due to vandalism of the country’s pipelines and oil theft.

“As of yesterday, we had crossed 1.6 million barrels per day, this is not rocket science. We have a line of sight to recover to the quota level of 1.8 million barrels per day. I know it is not far away, probably two to three months maximum, but we will be there and that will bring back partners to invest, return the confidence of our investors and ultimately bring back growth,” Kyari said.

According to him, the NNPCL and other stakeholders will work to achieve the goal of increased crude oil by ensuring cost reduction, increased production, being prudent in commercial decisions, fairness to stakeholders, as well as adherence to the provisions of the Petroleum Industry Act.

During the 13th Global United Arab Emirates forum held in January 2023, Kyari said Nigeria could achieve 2.2mb/d of crude oil production in 2023.

The PUNCH had in January reported how international energy firms such as Chevron and its Joint Venture and NNPCL were in talks to undertake fresh drilling operations in one of their core assets in Nigeria.

The duo is already pre-qualifying rig owners for the drilling campaign that is due to start in the second quarter of the year.

Findings showed that interested parties were given till last November 22 to submit bids. The deal will be announced as soon as all indices have been completed.

Likewise, Shell has put more than a dozen turnkey contracts on offer for work in the Niger Delta.

Findings showed that the drilling is a significant one, which entails a “drill to fill” tender process, contracts expected to be worth a total of at least $600m. The supermajor’s “drill to fill” policy has been around for at least seven years with the goal of producing enough oil and gas via drilling and development investments to maximise the capacities of existing infrastructure.

The project, The PUNCH learnt, is a Joint Venture among its Nigerian subsidiary, Shell Petroleum Development Company, NNPCL, TotalEnergies and Eni. 13 contracts are already out for bid, mostly on engineering, procurement and construction packages, and had received prequalification documents as of January 11.

An investment research firm, Hawilti had predicted that Nigeria and other top African producers will witness upstream revival and the launch of several multi-well drilling campaigns in 2023. According to the firm, at least 26 drilling campaigns and rigs are scheduled to be active in Africa during the year.

Also recently, the Federal Government flagged off the 2022/2023 mini-bid round process in accordance with the Petroleum Industry Act 2021.

The Nigerian Upstream Petroleum Regulatory Commission said the mini-bid round was an opportunity to spur new oil exploration and drilling activities in the prospective deep waters offshore Nigeria in 2023.

The Commission Chief Executive, NUPRC, Gbenga Komolafe, said the mini-bid round was aimed at further development of the deep offshore acreages.

The NUPRC said the bid round would be held in accordance with the PIA with its enhanced legal and regulatory frameworks that sought to encourage new investors and investments into the next phase of exploration in this region.

“The mini-bid round will be managed by the NUPRC, in line with the provisions of the PIA, as the statutory body responsible for ensuring compliance with petroleum laws, regulations, and guidelines in the Nigerian upstream petroleum industry."