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


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  • Delayed maintenance, low investment limits oil production
  • Angola and Nigeria pumped an average of 276 kbpd below quota – data
  • Nigerian companies rush work to increase production – Karim de Shoreline
  • Production below quota leaves hundreds of millions on the table

LAGOS, Sept.27 (Reuters) – Africa’s major oil exporters Nigeria and Angola will struggle to increase production to their OPEC quota levels at least until next year, as underinvestment and persistent maintenance issues continue to hamper production, sources from their respective oil companies warned.

Their battle mirrors that of several other members of the OPEC + group who have cut production over the past year to support prices when COVID-19 hit demand, but fail to scale up production to meet growing global needs. in fuel as economies recover. Read more

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 ending unprecedented supply cuts.

However, Nigeria and Angola have by-produced an average of 276,000 b / d so far this year compared to their combined average OPEC quota of 2.83 million b / d according to data from Refinitiv. . They are expected to remain below the quota until the end of the year, according to industry sources and Reuters calculations.

Unpumped oil is worth hundreds of millions of dollars.

Reuters Charts

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

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

The maintenance backlog covers everything from servicing wells to replacing valves, pumps and pipeline sections. The companies are also behind on plans for additional drilling to keep production stable. These issues have affected virtually every business in Nigeria, Karim said.

“So now things are breaking… now we are faced with music,” he told Reuters, while adding that the country would catch up with production by early 2022 as companies rush to maintenance and repairs.

Two sources, one from the Nigerian state oil company NNPC and another close to the 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 he expected Nigeria to hit its quota within a month or two, but did not specify how. The government previously stressed that a recently signed petroleum review law was essential to boost investment and production.

Angola’s finance ministry told Reuters it could struggle to meet its target for years.

DECLINE AND UNDER-INVESTMENT

In June, Angolan Petroleum Minister Diamantino Azevedo lowered his 2021 oil production target from 27,000 bpd to 1.19 million bpd, citing in a statement production cuts in mature fields , delays in drilling due to COVID-19 and “technical and financial challenges” in deep-sea oil exploration. This is below the current quota of 1.33 million bpd.

Angola pumped around 1.3 million b / d in 2020, down from its record high of over 1.8 million b / d in 2008.

He embarked on a series of reforms to stimulate production.

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

These five countries are Saudi Arabia, United Arab Emirates, Kuwait, Iraq and Azerbaijan.

Reuters Charts

In Nigeria, five onshore export terminals run by oil majors, which typically export around 900,000 bpd, processed 20% less oil in July than in the same period last year, despite relaxed quotas , according to an analysis shared only with Reuters from consulting firm Hawilti Ltd. The drop indicates a drop in production from all the onshore fields that supply these terminals.

Only the new oil field and deep offshore export terminal of French oil major TotalEnergies (TTEF.PA) Egina, was able to quickly shut off the taps, said Mickael Vogel, director of Hawilti, citing an analysis based on data from the Nigerian Ministry of Petroleum. Resources.

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

“Getting these wells back into service was more difficult than they thought,” said Vogel.

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

Reuters Charts

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

Reuters Charts

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

Angola’s largest fields started producing in the early 2000s and passed their plateau.

The country embarked on a series of reforms in 2019 aimed at boosting exploration, including allowing companies to produce from marginal fields adjacent to those they already operate. The pandemic delayed the impact of these reforms. In May, not a single rig was drilling in Angola for the first time in nearly 40 years.

Since then, only three offshore platforms have resumed work.

“They’re swimming against the tide with drops exceeding new production,” Cochrane said.

Additional reporting by Camillus Eboh in Abuja and Karin Strohecker in London; Editing by Dmitry Zhdannikov and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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