West Africa's October Crude Exports Down 10% As Nigeria's Output Continues Slump

23 November 2021

Crude oil seaborne exports from West Africa slumped below 3.5 million barrels per day in October, down from 3.84 million bpd in September as the continent's major producer, Nigeria, struggled to increase its production and exports, hampered primarily by local disruptions.

Documents show that the country witnessed the sharpest crude oil production decline among all members of the Organisation of Petroleum Exporting Countries (OPEC) in October 2021.

The fall observed in Nigeria's crude oil output, estimated to have surpassed 70,000 bpd, followed a force majeure declared by Shell, which halted loadings of Bonny Light crude after a pipeline shut down.

Nigeria's unstable production could become one of the biggest obstacles for OPEC+ efforts to increase supply by the end of this year. The country's total production capacity stands above 2.2 million bpd of crude and condensate, with a plan to reach 1.75 million b/d by early 2022, from an average of around 1.62 million b/d in the first half of 2021.

Last week the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, stated that the country was doing everything possible to make sure it returns to about 1.7 million to 1.8 million bpd, which the OPEC allocation is likely to hit by the year-end.

The NNPC boss had consistently attributed the inability of the country to comply with the OPEC production quota on the shutting down of oil wells last year at the peak of the mandatory cuts imposed by the oil producers' cartel due to the Covid-19 pandemic.

Nigeria, which produces sweet crude oil, mostly with light to medium grades, is expected to face difficulties in maintaining its production levels in the coming years given the mature profile of several fields. Grades such as Bonga, Egina, and Qua Iboe will face the most pressure as the government struggles to attract new investment in the upstream.

New field developments are expected to only add up to 35,000 bpd in 2022, while fields currently in the ramp-up phase could add another 70,000 bpd, according to projections by IHS Markit, a market intelligence firm.

Nigeria's government introduced the Petroleum Industry Act (PIA), in August, targeting to drive an increase of its crude oil output close to 4 million b/d.

However, a potential increase in the country's crude oil production in coming years should not necessarily translate into more exports, as Nigeria targets to refine more locally to supply increasing domestic demand for refined products.

The 650,000 bpd Dangote refinery is on track to be operational from early 2022, despite some delays suffered due to the coronavirus pandemic. When completed, it will be Africa's largest refinery.

State-owned NNPC plans to supply 300,000 bpd of crude to the refinery. The producer has been in talks to acquire a 20 per cent stake in the project, located near Lagos. But the country has been importing more than 1 million metric tons of petrol a month, as all its refineries, with a combined capacity of 445,000 bpd, remain shut down.

The Dangote refinery's slate will include at least three Nigerian crude grades - Escravos, Bonny Light and Forcados, the IHS Markit document stated.

Shipments of Forcados fell to 172,000 bpd in October, according to commodities at Sea, from 229,000 bpd in September. This is one of Nigeria's two largest grades exported, with average loadings exceeding 210,000 bpd in H1 2021.

This gasoil-rich sweet crude blend has a full capacity near 250,000 bpd, heavily relying on oil pipelines, which have suffered multiple coordinated attacks by militants in the restive Niger Delta, since early 2021.

Among other key crude grades of Nigeria, October's exports of Egina reached 161,000 bpd as against 167,000 bpd in September while Escravos and Qua Iboe stood at 139,000 bpd and 151,000 bpd respectively, down 13 per cent and 20 per cent over the month.

Bonny Light loadings fell to 61,000 bpd in October as against 74againspd in September, while a year ago, activity typically surpassed 160,000 bpd.

In addition, Nigerian loadings heading for Mediterranean importers fell marginally to 454,000 bpd in August, from 458,000 bpd in September while flows shipped to Spain strengthened to 260,000 bpd in October, from 180,000 bpd in September.

Furthermore, flows to North-west Europe fell sharply, to 254,000 bpd in October, compared with 388,000 bpd in September as loadings heading for the Netherlands collapsed to levels near 96,000 bpd in October, compared to 162,000 bpd in September, according to the IHS Markit report.

It stated that shipments from Nigeria to India recovered in October, standing at 283,000 bpd, versus 200,000 b/d in September with most flows referring to grades such as Agbami, Akpo, Bonny Light and Bonga.

But Ghana's crude oil exports stood at 123,000 bpd in October, according to Commodities at Sea. This is 24 per cent down from September's shipments of 161,000 bpd.

Activity typically averages near 150,000 bpd. Crude loadings of the West African country have been scheduled at 153,000 bpd in December, marginally down from 158,000 bpd planned for November.

Exports of Jubilee should rise to 92,000 bpd in December, from 63,000 bpd in November, according to loading schedules as activities stood at 61,000 bpd in October, according to Commodities at Sea, down from 97,000 bpd in September.

In the western coast of Southern Africa, Angola's exports in August inched down 32,000 bpd to 1.19 million bpd, standing 2.6 per cent lower than a year ago. Flows to China declined to 832,000 bpd in October, versus 928,000 bpd in September.

China's crude imports from Angola and West Africa overall fell to 1.26 million bpd in October, from 1.37 million bpd in September, as competition from Middle Eastern suppliers increases.

Shipments to India collapsed to just 31,000 bpd in October, from 128,000 bpd in September.

Like Nigeria, Angola's oil sector has been facing structural challenges in the last five years, especially with lack of new investments in exploration and a failure to maintain production levels at mature oil fields.

In addition, involuntary outages across smaller producers in West Africa pushed the region's supplies further down. Congo, Cameroon and DR Congo were the only exporters in the region to report some small gains in October 2021, adding 173,000 bpd in total over month.

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