WED, JULY 05 2023-theGBJournal |The growth of the Oil sector remained negative in Q1-23, although we note that the decline (-4.21% y/y) was an improvement from the -13.38% y/y contraction recorded in Q4-22.
In line with our expectations, the moderate contraction was bolstered by higher crude oil production, which settled at 1.51mb/d in the review period (Q4-22: 1.34mb/d | Q1-22: 1.49mb/d).
Remarkably, Nigeria’s crude oil production has maintained a steady uptrend since reaching its lowest level in September 2022 (1.14mb/d).
The improved oil production is largely supported by the positive impact of the government’s recent efforts to curb crude oil theft and vandalism in the upstream segment of the oil sector.
Our analysis of the data from the Nigerian Upstream Regulatory Commission (NUPRC) showed that crude oil production increased across the Escravos (+24.4% y/y), Odudu (+44.8% y/y), and Bonga (+23.1% y/y) production terminals, while it declined modestly at the Forcados (-1.9% y/y) terminal.
Although oil production declined in April 2023 (-18.0% m/m) due to strike induced shutdowns at a few oil terminals, we still expect crude oil production (including condensates) to average 1.53mb/d, higher than the 2022FY production volume (1.37 mb/d), especially as NNPCL has intervened to resolve the disputes.
The Federal Government’s relentless efforts to eradicate oil theft and major pipeline vandalism support our expectation for higher crude oil production.
Besides, the Federal Government recently signed the Nigeria Upstream Petroleum Measurement Regulations, 2023, and six others into law to tackle inaccurate measurements.
We also believe that the reopening of major oil terminals that were shut down for most of 2022, will support higher crude oil production.
That said, we estimate that the production level for 2023FY will be significantly below pre-pandemic levels (c.2.10mb/d) and Nigeria’s current OPEC crude oil production quota (1.74mb/d), highlighting other factors limiting crude oil production, including, (i) lagging impact of ageing infrastructure, (ii) limited investment inflows, and (iii) International Oil Companies (IOCs) divestments away to cleaner energy amid a challenging operating environment.
Indeed, given the continued reduction in Nigeria’s actual crude oil production, the country’s 2024 oil production quota was reduced to 1.38mb/d at the last OPEC+ meeting held on 04 June 2023.
Overall, we expect the Oil sector growth to return to positive territory in the short-to-medium term, with a growth estimate of 10.72% y/y in 2023FY (2022FY: -19.22% y/y). Analysis is provided by Cordros Research.
Twitter-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.com| govandbusinessj@gmail.com
