Nigeria struggles as oil output falls

Nigeria, the world’s eighth largest oil producer, does not know exactly how much of the black gold it churns but one thing is certain — three years of militant attacks have led to a sharp decline.

The country of 140-million people has vast oil and gas reserves but violent unrest since 2006 in the Niger Delta, the region that lays the golden egg, has seen its fortunes nosedive.

Before the Movement for the Emancipation of the Niger Delta (Mend), the most prominent and sophisticated armed group, came on the scene and began destroying oil facilities and kidnapping oil workers, the nation produced 2,6-million barrels per day (bpd).

Mend, which says it is fighting for a greater share of the Delta’s oil wealth for local communities, declared a 60-day truce on July 15 in response to a government amnesty deal.

Most analysts estimate current production at 1,2-million to 1,4-million bpd.


Petroleum Minister Rilwanu Lukman on Wednesday put the figure at about 1,5-million bpd, less than half of the nation’s capacity.

Oil export earnings fell by about half to $4,92-billion in the first quarter of 2009 compared to the previous quarter, according to the National Bureau of Statistics, with falling global prices adding to the pressure.

Reflecting the strain on its finances, Nigeria’s foreign reserves fell to $43,2-billion in the first half from $53-billion at the end of December.

In its last monthly report, the International Energy Agency (IEA) said Nigeria’s production fell to 1,72-million bpd in June from 1,8-million bpd in May and 1,78-million bpd in April.

The most pessimistic of foreign analysts recently put production at the end of June at between 800 000 and one million bpd.

“My current estimate is between 1,3 and 1,4-million bpd,” Olivier Jakob of Petromatrix in Zurich said, adding that the IEA figures were on the high side.

Behind the many figures, lies the stark reality that despite its oil and gas riches, Nigeria faces huge development challenges made more difficult by the global economic slowdown.

In March, President Umaru Yar’Adua signed off on a 2009 budget based on forecasts for oil output of 2,292-million bpd even as he put the actual figure at 1,6-million bpd.

The president warned that if production did not rise and crude prices continued to fall, the fiscal deficit for the year would go above 5% of gross domestic product (GDP).

For Nigeria’s fast growing population, the outlook is uncertain.

The unresolved crisis in the oil-rich Niger Delta is further compounded by tensions between the giant oil multinationals the Nigerian authorities working out a new law for the industry.

The companies fear the proposed legislation, now before the parliament, could impose heavy costs on them which they argue will result in much reduced capital investment, in turn curtailing future oil production. – AFP

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