Africa shows how difficult it is getting to pump crude oil

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The global infrastructure for pumping crude from the ground is cracking, and nowhere is this more apparent than off the west coast of Africa. Years of underinvestment, theft, sabotage and civil unrest have combined with harsh operating conditions to undermine the region’s oil production, sending it into a slump from which it may never recover. .

In 2010, West African countries pumped nearly 5.5 million barrels per day of crude oil and condensate, or about 7% of global production. By 2021, that figure had fallen to just over 3.5 million barrels per day, and the region’s share of the total had fallen by two percentage points. This year, the levels will fall further.

West Africa’s two big producers, Nigeria and Angola, are both struggling with long-term declining deposits. But the problems don’t end there.

Production cuts agreed by oil producer group OPEC+ in 2020 in response to the Covid-19 pandemic appear to have led to permanent production capacity losses for the two West African giants. Neither was able to restore production which had been shut down between April and June 2020, even as their targets began to increase in early 2021.

Production data from Nigeria’s upstream oil regulator shows crude output falling below 1 million barrels per day in August and September. This is barely half the level seen in the first months of 2020 before the OPEC+ cuts. Even when production targets started to increase, Nigeria’s production continued to move in the opposite direction.

The country will increase its production by 500,000 barrels per day by the end of November, according to the managing director of the Nigerian National Petroleum Co., Mele Kyari. It’s a tall order that would bring production to a level it hasn’t reached in over two and a half years. I’m not convinced he can do it.

Even if the target is reached, maintaining production at this level seems difficult. Upstream investment on land and in shallow waters is almost non-existent, while spending in deeper waters will do little more than slow the decline.

But an even bigger problem is posed by the lack of security of the oil infrastructure. The widespread theft of crude from pipelines that criss-cross the Niger River delta region has forced producers to close wells. The situation has deteriorated so badly in recent months that one of the biggest crude oil pipelines in the region – the 180,000 barrel-per-day Trans-Niger Pipeline – was forced to shut down in June after flows slackened. reduced to a net.

Vessel tracking data used to monitor the country’s oil exports shows that shipments from terminals that process crude produced in the Niger River Delta region have plummeted in recent months.

While Bonny and Brass terminals remain closed, Shell Plc restarted shipments from Forcados earlier this month after a 10-week closure. This should help achieve Kyari’s goal, but there’s still a long way to go to protect the pipelines. The government is now turning to those who previously sabotaged oil infrastructure for protection. It also appears set to require the installation of monitoring equipment that detects pipeline losses in real time, a demand that will increase the cost of production in the region.

Meanwhile, production is also falling further south in Angola. When the country joined OPEC in 2007, it was a hair’s breadth away from pumping 2 million barrels of crude a day. 15 years later, it is struggling to maintain its production at half that level. The new projects mostly exploit fields close to those already in production, using the unused capacity of floating production units as it becomes available to stem the decline in production. But there are no new offshore production centers being developed that could reverse the decline any time soon.

Connecting nearby fields to existing vessels may help for a while, but soon Angola will need major new investments to prevent its production from falling below 1 million barrels per day.

While the two major producers in the region are struggling, the West African oil producers club could soon welcome a new member. Namibia, neighboring Angola to the south, is hoping recent discoveries by Shell and TotalEnergies SE off its coast will herald long-awaited oil production. But will Namibia’s prospects be bright enough to eclipse the dwindling prospects of Nigeria and Angola? I doubt.

Perhaps Russia’s self-destruction as an upstream investment destination will encourage the oil majors to look again at prospects offshore West Africa. Recent successes in Namibia and across the Atlantic off Guyana – the other flank of the rift that opened up between Africa and South America in the Jurassic – could lead to a rethink. This cannot come too soon for the oil-dependent economies of Angola and Nigeria.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Julian Lee is oil strategist for Bloomberg First Word. Previously, he was a senior analyst at the Center for Global Energy Studies.

More stories like this are available at bloomberg.com/opinion

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