Theft knocks Nigeria’s oil output to four-year low

Nigeria is suffering the worst wave of oil production disruptions in four years, with output falling to levels last seen before the government’s amnesty programme ended militancy in the Niger Delta, the Financial Times reported on Tuesday.

Industrial scale oil theft, sabotage and technical problems, according to the report, have caused crude output to drop to less than 1.9 million barrels a day this summer, the lowest since mid-2009, when production briefly dipped to a 20-year low of 1.5 million bpd.

Any further fall will allow Angola to assume Nigeria’s position as the continent’s largest crude producer, the report stated.

“Output has been less than two million barrels a day for several months,” said Rolake Akinkugbe, Head of Energy Research, Ecobank.

“It’s a reflection of the headwinds facing oil companies in Nigeria,” she added.

The country’s production difficulties have helped push global crude prices above $110 a barrel. They have also damaged the financial outlook in Africa’s second-biggest economy, where oil and gas account for nearly 80 per cent of fiscal revenues.

The country had budgeted for oil sales of 2.5 million bpd in 2013, which, combined with the high petroleum prices, should have allowed for substantial savings in the Excess Crude Account, the government’s rainy-day fund. But instead of increasing, the fund has been run down from $9bn in December to $5.1bn in July.

The Head, Africa Research, Standard Chartered Bank, Mrs. Razia Khan, said falling oil revenues should be a worry for the government, especially with a presidential election scheduled for early 2015.

The Financial Times reported that previous polls had been preceded by a sharp increase in spending and leakages in revenue collection as politicians tried to buy their way to power.

“Nigeria still has a comfortable current account surplus, but it is declining, as is the Excess Crude Account. Unless we see a turnaround in oil revenues, investors are going to start to get concerned,” Khan said.

Nigeria drastically reduced the number of oil worker kidnappings and pipeline bomb attacks in 2009 by persuading more than 26,000 militants to disarm in exchange for monthly cash payments, which are ongoing. While the violence has not returned, the theft of oil has grown into a vast and lucrative enterprise involving well-connected officials and security personnel.

More than 150,000 barrels of oil are reportedly stolen every day, with some feeding illegal refineries in the Niger Delta and the bulk shipped to destinations as far away as Asia.

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