What are the drivers of the decline in oil production?

Production has been declining since 2012. It’s a combination of a lot of factors.

I think insecurity of assets is top on the list – and insecurity of life. Secondly, the maturity of the fields. Thirdly, moving away from onshore to deep water.

There is also a declining capacity to produce from a technical production point of view and from a market production point of view because of the COVID-19 pandemic.

Technical production is what is actually coming out of the wells and fields. This is obviously affected by the number of wells that are put into production and the less producing wells in a field at its peak, less the aggregate field output.

Market production is what the country is able to put into the international market and the domestic market.

Both of them are related, but the market fundamentals of supply and demand affect both of them differently depending on the inventory level. Inventory levels are what’s kept in the tank farms where crude oil is stored while waiting for exports and pipeline movement to the refineries.

What are the constraints on what’s coming out of the wells?

Increasing technical production requires drilling more wells, finding more reserves and installing more infrastructure. When you have infrastructure decay, and field productivity decline, the technical production will decline.

Since 2003 Nigeria has not put any bidding processes in place to meet exploration and development of fields. And it takes a lot of years before you can tie them up for production.

There have also not been any new leases. The last one was 2007 apart from the bidding for marginal fields in 2003. As a result we see the maturity of the basins. Playing and production capacity has remained static at about 2.5 million barrels per day.

Read more: https://theconversation.com/nigeria-is-producing-less-and-less-oil-heres-why-191199