By Adedapo Adesanya
Rising security threats are posing a major risk to Nigeria, a key supplier of light sweet crude grades to Europe, industry officials and analysts have warned.
S&P Global Platts Analytics expects Nigeria to be one of the largest risks for the Organisation of the Petroleum Exporting Countries and allies (OPEC+) production growth in end-2021 and has warned supply threats by militants could resurface as violence is rising in the southeast of the country.
Last month, gunmen attacked a convoy of workers involved in Shell’s Assa North gas development project in Imo State, causing fatalities. Shell shut down the gas plant and other facilities in the vicinity following the incident.
According to a Platts report, Nigeria has the capacity to produce around 2.2 million-2.3 million barrels per day of crude and condensate, but production has averaged only around 1.62 million barrels per day for the first seven months of 2021.
Key crudes such as Bonny Light, Escravos, Forcados, and Qua Iboe have all faced production issues due to operational and technical issues.
According to the report, the latest rise in security threats would impact the Nigerian oil industry, especially in the area of production costs, something the country is trying to reduce to $10 per barrel, as companies will need to spend more on protection for workers and facilities.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has said the increasing attacks by bandits and other criminal activities, including kidnapping for ransoms in the oil hubs of Port Harcourt and Warri, have also stifled foreign direct investment into the Nigerian economy.
“We are finding it increasingly difficult to put our members in check as their restiveness regarding the growth and rise of insecurity across the country is getting out of control and the accompanying consequences are unimaginable,” the oil union said in a statement on August 27.
In addition, some of Nigeria’s main oil infrastructure has also faced persistent sabotage in the past few months including pipeline vandalism.
Nigeria has a long history of security issues impacting its oil industry. Militants operating in the Niger Delta ramped up attacks on oil fields and terminals in 2016, pushing production to a low of 1.4 million barrels per day.
In response, President Muhammadu Buhari retained a presidential amnesty program for militants to maintain peace in the Niger Delta which was first instituted in 2009.
The initial introduction of the program back in 2009 helped rein in activities that had caused extensive damage but there is now a concern that some groups may opt-out of the amnesty leading to more attacks on oil infrastructure.
