Pipeline problems hamper Nigerian oil production

29 August 2017, Week 34, Issue 704

During July, Nigeria produced 1.8 million bpd of oil, excluding condensates. “We continue to have challenges,” Emmanuel Ibe Kachikwu said. “Some of our pipelines are old, so these are basically technical. They are not militancy-induced stoppages, but they are basically maintenance-induced stoppages.”

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A fall in the number of attacks on energy infrastructure this year – partly due to government efforts to negotiate with militants – has helped Nigeria’s crude production rebound. This marks a turnaround from 2016, when a string of assaults on facilities in the Niger Delta oil hub slashed around a third off production. 

Maintaining peak output levels above 1.8 million bpd has however proved challenging.

Kachikwu also expressed optimism however that the new fund would help shore up production and see local companies enjoy a bigger slice of the benefits.

The fund will provide five-year financing to local companies at single-digit interest rates, meaning they can borrow money much more cheaply than through commercial banks, he said. This will improve their ability to grow while also helping Nigeria meet its target of cutting the cost of producing oil to US$15 per barrel.

“Over the years, Nigerian companies have found it difficult competing with their counterparts from jurisdictions where funding is accessible for 5% or less as compared to our market, where bank lending rates hover around 20%,” Kachikwu noted.

“Some Nigerian banks are still unable to provide long-term financing required by the local supply chain to build needed capacity,” he added. “The banks also lack sufficient knowledge of the oil and gas sector.”

Nigeria’s overall production outlook also received a boost last week with news that Phase 2 of Shell’s Gbaran-Ubie integrated oil and gas development had been completed. This is expected to add 175,000 boepd to the country’s output from 2019 plus US$8.75 million to state coffers.

 

Edited by

Ed Reed

Editor

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