Viewpoint: West African crude output in decline

Nigeria — Africa's largest oil producer — is likely to continue battling unplanned crude production outages in 2022, as international investments starts to wane.

Disruption to crude production infrastructure has been a long running issue for Nigeria, but the scale of the problem is worsening, and some buyers are losing trust in the country's supply reliability. Nigeria's output averaged 1.41mn b/d between January-November 2021, down from 1.63mn b/d over the same months in 2020.

Production from several of the country's key streams was affected by outages this year, including Qua Iboe, Bonny Light, Forcados, Brass River and Erha. And disruption at the Forcados, Bonny Light and Brass River terminals appeared set to continue into 2022. Shell declared force majeure at the Forcados terminal effective 21 December due to a malfunctioning barge blocking tanker access, and it is unclear how long the problem may persist. Although Shell lifted force majeure restrictions that followed a pipeline leakage at the Bonny Light terminal on 22 November, no cargoes have left between 21 November-21 December at least, perhaps indicating problems may not be resolved.

A pressure issue at Brass River has capped output for the light sweet stream throughout 2021, with no resolution on the cards for the near term.

Production outages in Nigeria have had a long-lasting effect with streams unable to recover to pre-shutdown output levels, and the country falling short of its monthly Opec+ production quotas throughout the year. Although state-owned NNPC managing director Mele Kyari said in November he expects the country's output to return to Opec+ quota levels by the end of 2021, it seems very unlikely as, according to Argus estimates, production remained 160,000 b/d below the output ceiling in November.

Nigeria's production issues might worsen, with some international investors signalling they could withdraw from the country. Shell chief executive Ben van Beurden said the firm is in talks with the Nigerian government after concluding its onshore oil position in the Niger delta is no longer worth the risk, because of persistent incidents of pipeline sabotage and crude theft. ExxonMobil is in talks with Nigerian oil firm Seplat Energy to sell its shallow-water assets in the country. The major is also in talks with Africa-focus independent Savannah Energy to sell its stake in the Doba oil project in Chad.

A lack of investment combined with a natural decline at maturing fields has also meant that crude output in Angola — Africa's second largest oil producer — continued to fall in 2021. And, although promising, the start-up of new projects in 2021 is unlikely to stem the country's production decline in 2022. The Angolan parliament approved a 2022 budget proposal assuming daily crude production average of 1.148mn b/d, which is 72,000 b/d below the 1.22mn b/d planned in the 2021 budget.

BP started production ahead of schedule at the Platina crude field in block 18, which will add 30,000 b/d. Production also began at the Clov 2 project in block 17, with output there forecast to peak at 40,000 b/d by mid-2022. Italy's integrated Eni began producing in September 2021 at the Cabaca North project, which feeds Olombendo output, and will add 15,000 b/d to production.

TotalEnergies said it has begun crude production at the Zinia phase 2 project offshore Angola, and output should reach 40,000 b/d by mid-2022. Chevron agreed to renew its concession for a further 20 years at block 0, which feeds into Angola's key streams Cabinda and Nemba.

Angola's crude output averaged 1.11mn b/d in January-November 2021, according to Argus estimates, down by 13pc compared with the same period in 2020, and by 20pc from January-November 2019. And similarly to Nigeria, Angola has failed to produce at Opec+ target levels throughout 2021.

By Andy Devine