Nigerian Oil Production

There has been much debate on OPEC’s spare capacity. Nigeria, which is an OPEC member, sheds some light on this issue. Pre-Covid and OPEC+ production cuts, Nigeria was producing 2.1m bpd. This fell to below 1.5m bpd at the end of 2021. It is important to note that current production levels are well below their OPEC quota of 1.75m bpd. Nigeria’s production has fallen to such low levels due to massive underinvestment, which peaked at >$20bn in 2015 but has since fallen to below $5bn annually. This was mainly due to one of the most unfavorable oil tax regimes in the world, which has been partly rectified by the recent passage of the Petroleum Industry Act that was over a decade in the making. But will it be enough? The global oil majors, under pressure from shareholders to reduce their oil and gas investments on ESG grounds, have started selling their Nigerian oil fields to indigenous companies. The pressure will be on these smaller E&P players to invest and ramp up production in order to get any where near the government’s 3m bpd target. Underinvestment in the oil industry is real and will likely translate to higher for longer oil prices, even with the emergence of EVs. OPEC’s spare capacity is estimated at 4m bpd currently. If this includes Nigeria’s ability to produce 2.1m bpd, it is clearly overstated.

Nigeria Oil Production