New threats seen to Nigerian oil output

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TUE, SEPTEMBER 19 2017-theG&BJournal-A possible resumption of Niger Delta militancy threatens a 5-month recovery in oil production in Nigeria, one of two wildcard members of the Organization of Petroleum Exporting Countries warns an analyst at Verisk Maplecroft, Bath, UK.

“Militant groups are running out of patience, the government is unable to deliver on its promises, the president is a ‘lame duck,’ and the umbrella group negotiating on behalf of the militants shows signs of disintegration,” writes Malte Liewerscheidt, politics senior analyst, Africa, in a research note.

Since early 2017, when Vice-President Yemi Osinbajo showed interest in negotiating a new truce, delta rebel groups have largely refrained from attacking pipelines, allowing oil production to recover.

An agreement reached in 2009, which included security contracts for militant leaders and cash stipends for their followers, lapsed last year, partly because of government funding problems.

According to Liewerscheidt, the lack of progress toward renewal of the agreement prompted several groups recently to threaten to start bombing pipelines again.

Modular refineries

The government says it will begin construction of modular refineries across the Niger Delta to provide jobs and discourage illegal refining.

But details about implementation of that project “remain extremely murky,” Liewerscheidt writes. Funding remains a challenge with oil prices and production suppressed.

Further damaging prospects for a Niger Delta deal is the declining influence of President Muhammadu Buhari, who spent most of this year in London receiving treatment for an undisclosed illness and who now works from home.

Whether he will run for reelection in 2019 is uncertain. Competition among presidential candidates for Niger Delta votes will undermine the government’s negotiating position with militants, the analyst notes.

Meanwhile, the Pan Niger Delta Forum, which claims to represent militant groups, is struggling with internal dissent.

One of the groups, the Movement for the Emancipation of the Niger Delta, withdrew from the forum in August.

OPEC wildcards

Because of production suppressed by internal strife, Nigeria and Libya are exempt from production limits implemented by OPEC in January.

But strong midyear output gains from the countries raised concern among other OPEC members and threatened to undermine cohesion essential to supply coordination.

For Nigeria, OPEC officials have discussed imposing a cap when production reaches 1.8 million b/d.

According to the International Energy Agency’s September Oil Market, Nigerian production rose to 1.66 million b/d in August, its highest monthly average since February 2016, from 1.64 million b/d in July. Nigerian output had sunk to a three-decade low of 1.15 million b/d in August 2016.

In Libya, meanwhile, the production rebound ended in August, when new disruptions related to civil war cut output to 870,000 b/d in August from 1.01 million b/d in July, the first time in 4 years the country’s production had exceeded 1 million b/d.-OGJ editors report

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