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Nigeria, Angola won’t meet OPEC output quotas for at least another year: IEA

Top African oil producers Nigeria and Angola are unlikely to meet current OPEC output quotas for at least another year as persistent underinvestment and maintenance issues have crippled energy facilities, according to the International Energy Agency.

Nigeria, the region’s largest producer, has seen production plunge to its lowest level in more than 30 years to 1.23 million b/d in May, according to estimates by S&P Global Commodity Insights, due to a host of security, operational and technical problems since early 2021.
Nigeria’s crude and condensate production is almost half its 2.2 million b/d output capacity, with key oil fields and terminals struggling, exacerbated by a resurgence in attacks on oil infrastructure.

Angola, meanwhile, Africa’s third biggest producer, has also seen output plummet from close to 1.8 million b/d five years ago to 1.16 million b/d in May, according to the Platts OPEC survey.

Angolan crude output had been on a steep downward trajectory because of technical and operational problems at some fields, aggravated by a lack of upstream investment and incentives. The last time Angola’s crude production was at these levels was in 2006 when output from its offshore fields was still ramping up.

The IEA noted in its special report on Africa on June 20 that “persistent underinvestment and maintenance have left many facilities in key African OPEC producers struggling to restart and ramp up production.”

The report added that Nigeria and Angola are not expected to be able to meet their current OPEC quotas “for at least another year, having produced almost 300,000 b/d less than their combined quotas throughout 2021.”

Nigeria has an OPEC quota of 1.753 million b/d and Angola has a quota of 1.465 million b/d, with Platts estimates suggesting current overcompliance with output cuts at 788% and 584% respectively — the two largest among the OPEC producers.

Little optimism
Platts Analytics expects Nigerian crude supply to recover towards 1.5 million b/d in the fourth quarter of 2022, but that would still suggest a very limp recovery.

Further out, Nigerian crude production is not expected to reach much more than 1.51 million b/d in 2023 and could dip lower by the end of next year, according to Platts Analytics.

Meanwhile, Angola’s crude production is forecast to continue declining in the coming years, dipping below 1 million b/d by 2024.

“The sharp fall in oil demand and prices at the start of the pandemic led to a near 20% drop in oil production in Africa,” the IEA noted as it documented a tale of woe in its report, which point to “flagging” investment in African oil and natural gas production since the price downturn in 2014.

The 2020 price shock — with the Platts Dated Brent benchmark falling to a 21-year low in April that year of around $13/b — left producers struggling even more to pay for much‐ needed maintenance and repairs, as well as to finance the development of new fields, the energy watchdog highlighted. The region’s pipeline and storage infrastructure, which is crucial to serve domestic markets, have also struggled.

“Many international oil companies, which make up a large part of African oil and gas production, have become increasingly reticent to make large‐scale investments due to the lack of regulatory clarity and uncertainty over future global demand,” the IEA added.

Instead, many energy majors having refocused their portfolios, prioritizing production from fields with higher financial returns, the Paris-based agency added.

With energy prices having recovered, the IEA said net income from oil and gas production combined doubled in 2021, but remained well below pre‐pandemic levels and its historic peak in 2012. However, with oil prices nestled in the trip digit area, there may be grounds for optimism yet for some of Africa’s top oil producers.
Source: Platts

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