Nigeria Declares Oil Sector Emergency Amid Efforts to Boost Production

Nigeria’s national oil company NNPC Ltd has declared a state of emergency on production in Nigeria’s oil and gas industry as Africa’s largest oil producer struggles to boost output.

NNPC believes that Nigeria needs to take urgent action to address the challenges that have plagued the oil and gas industry for years, NNPC Group Chief Executive Officer, Mele Kyari, said at an industry event this week.

Raising oil production has been a key priority for the Nigerian federal government, which aims to thus boost revenues and foreign exchange reserves.

Oil theft and pipeline vandalism have long plagued Nigeria’s upstream oil and gas industry, driving majors out of the country and often resulting in force majeure at the key crude oil export terminals.

The combination of pipeline vandalism and oil theft with a lack of investment in capacity has made Nigeria the biggest laggard in crude oil production in the OPEC+ alliance. Due to the underproduction, OPEC even reduced last year the quota for Nigeria’s oil production. 

“We have decided to stop the debate. We have declared war on the challenges affecting our crude oil production. War means war. We have the right tools. We know what to fight,” Kyari said.

“We know what we have to do at the level of assets. We have engaged our partners, and we will work together to improve the situation.”

An analysis of the oil and gas assets in Nigeria has found that the largest OPEC producer in Africa can easily pump 2 million barrels per day (bpd) of crude oil without deploying new rigs, Kyari said.

Nigeria currently produces about 1.5 million bpd of crude.

According to NNPC’s chief executive, “the major impediment to achieving that remains the inability of players to act in a timely manner,” the company said.

In early May, Nigeria launched a new oil and gas licensing round, inviting bids for as many as 12 onshore and offshore blocks and promising transparency in the bidding process.

International majors have shrunk their exposure to Nigeria’s energy sector in recent years, with transparency in the licensing rounds one of the reasons for Big Oil to divest from their Nigerian assets, on top of oil theft and frequent pipeline damages.