Nigerian oil output on recovery path as Forcados ramps up

Nigerian crude output was rising sharply with key export grade Forcados pumping at elevated levels, oil ministry officials said Feb. 8.

Africa's largest oil producer, plagued by numerous operational and technical problems in the past few months, had seen production drop below 1.5 million b/d even though it has the capacity to pump over 2 million b/d.

But there have been encouraging signs for the OPEC member as some key export crude grades -- such as Agbami, Bonny Light, Forcados and Qua Iboe -- have seen steady increases in recent weeks.

Crude and condensate production in January hit a nine-month high of 1,676,646 b/d, up from a more than two decade low of 1,471,210 b/d in December, according to Nigerian Upstream Petroleum Regulatory Commission data.

Officials said similar output levels were seen in the first week of February.

Forcados, which was on force majeure in December due to issues near the export terminal, saw its production recover sharply. Oil fields linked to Forcados pumped 270,439 b/d in January, the highest since October 2020 and after 173,167 b/d in December.

Nigeria's oil sector finds itself in a fragile state, suffering from major production setbacks and also fighting a wave of divestments from international oil companies.

All its key export crude grades -- also including Brass River, Escravos and Yoho -- faced many production issues in 2021.

January crude production rose 201,520 b/d month on month to average 1,398,507 b/d, while condensate output rose to 278,138 b/d from 274,213 b/d, NUPRC data showed.

That was still below its January OPEC quota of 1.683 million b/d, as it had been throughout 2021.

Nigeria's crude oil production caps under the OPEC+ deal for February and March are 1.701 million b/d and 1.718 million b/d, respectively.

Downside risks

Persistent outages on major grades related to theft, pipeline sabotage, unplanned maintenance and technical issues, along with insecurity in the Niger Delta will continue to threaten the growth outlook for Nigeria's oil output, according to S&P Global Platts Analytics.

Oil supply will grow to 1.7 million b/d by mid-2022, from 1.3 million b/d in December but downside risks on ongoing issues remain, it said in its recent forecast.

"Declines are expected in 2023 and onwards due to a lack of project FIDs, stalled on the now-passed petroleum bill. We expect new projects to ramp up in the late 2020s/early 2030s," it said.

Nigerian crude is light and sweet, largely low in sulfur, and yields a generous amount of diesel, jet fuel and gasoline, which are the profit-making products for global refineries.

But it has emerged as the swing barrel in the past few years. It may have the geographical flexibility to sell oil east or west as demand requires, but it faces increased competition from many producers, and has been particularly affected by the dramatic rise in US shale production, which is alike in quality.