Monday, January 24

As OPEC reopens taps, African giants lose race to pump more


Top African oil exporters, Nigeria and Angola, will struggle to boost production to their OPEC quota levels until at least next year, as lack of investment and persistent maintenance problems continue to hamper production, they warn. sources from their respective oil companies.

Their battle mirrors that of several other members of the OPEC + group who halted production last year to support prices when Covid-19 hit demand, but are now failing to ramp up production to meet growing global fuel needs as the demand ramps up. economies rebound.

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The Organization of the Petroleum Exporting Countries and its allies (OPEC +) agreed in July to add 400,000 barrels per day (bpd) to production from August to December 2021, gradually eliminating unprecedented supply cuts.

However, Nigeria and Angola have underproduced an average of 276,000 bpd so far this year from their combined average OPEC quota of 2.83 million bpd according to Refinitiv data. They are likely to remain below quota through the end of the year, according to industry sources and Reuters calculations.

Oil that is not extracted is worth hundreds of millions of dollars.

Blockades aimed at stopping Covid-19 last year hampered the supply of spare parts and prevented maintenance work. Companies hit by a 20-year low in crude prices also postponed major investments.

Kola Karim, chief executive of Nigerian producer Shoreline Natural Resources, which has eight production fields pumping around 50,000 bpd, said the backlog meant it would take one to two quarters before Nigeria could pump at full capacity.

The maintenance backlog covers everything from well maintenance to replacement of valves, pumps, and pipe sections. The companies are also behind in their plans to carry out complementary drilling to keep production stable. These problems affected virtually every company in Nigeria, Karim said.

“So now things are breaking down … now we are dealing with music,” he told Reuters, although he added that the country would catch up with production in early 2022 as companies rush into maintenance. and repairs.

Two sources, one from Nigerian state oil company NNPC and another close to Angolan state oil company Sonangol, confirmed that the countries were struggling to increase production.

Spokesmen for the NNPC and Nigeria’s oil and finance ministries did not respond to requests for comment.

Oil Minister Timipre Sylva told reporters last week that he expected Nigeria to meet its quota within a month or two, but did not specify how. The government has previously singled out a recently signed oil reform law as key to boosting investment and production.

Angolan Finance Ministry told Reuters it could struggle to meet its target for years.

Decline and underinvestment

In June, Angolan Oil Minister Diamantino Azevedo cut its 2021 oil production forecast by 27,000 bpd to 1.19 million bpd, citing production declines in mature fields, drilling delays due to Covid in a statement. -19 and “technical and financial challenges”. in deepwater oil exploration. That’s below the current quota of 1.33 million bpd.

Angola pumped roughly 1.3 million bpd in 2020, down from its all-time high above 1.8 million bpd in 2008.

It has embarked on a series of reforms to boost production.

“The reality is that, in our opinion, only five countries can meet these quotas,” said Amrita Sen of Energy Aspects. “The rest are struggling with high rates of decline and lack of investment.”

Those five are Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, and Azerbaijan.

In Nigeria, five onshore export terminals run by Big Oil, which normally export around 900,000 bpd, handled 20% less oil in July than at the same time last year, despite relaxed quotas, according to an analysis. shared only with Reuters from consulting firm Hawilti Ltd. The decline indicates lower production from all onshore fields that feed these terminals.

Only French oil company TotalEnergies’ new oilfield and offshore export terminal, Aegina, had been able to quickly turn the taps back on, said Mickael Vogel, director of Hawilti, citing an analysis based on data from the Department of Petroleum Resources in Nigeria.

Production from onshore oil fields has lagged as companies struggled with a lack of workers and cash.

“Getting those wells back online has been more challenging than they thought,” Vogel said.

Nigeria has not met its quota since July last year according to Refinitiv data.

Angola, Africa’s second-largest exporter, has pumped below its target since September last year.

It has struggled for years as its oil fields age and decline, and exploration has been insufficient to compensate, said Justin Cochrane, IHS director of African Regional Research.

The largest fields in Angola began producing in the early 2000s and have surpassed their plateau.

The country carried out a series of reforms in 2019 aimed at boosting exploration, including the possibility for companies to produce in marginal fields adjacent to those that already operate. The pandemic stunted the impact of those reforms. In May, not a single rig was drilling in Angola for the first time in almost 40 years.

Since then, only three offshore platforms have resumed work.

“They are swimming upstream with declines that exceed new production,” Cochrane said.


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