Nigerian Government Requesting Production Increases

The Nigerian Federal Government has instructed some oil companies to increase production to meet Nigeria's capacity this month, in an effort to make up for the production losses due to the violence in the Niger Delta.

Nigeria's oil production had been reduced to around 1.9 million barrels per day (bpd) compared to its officially assigned quota of 2.018 million by OPEC, since March this year when ethnic violence broke out in Warri in the Niger Delta.

While oil industry sources disclosed that they had been told to raise production to full capacity, the Department of Petroleum Resources (the nation's oil industry monitors) said at the weekend that companies with spare capacity had only been directed to make up for the losses from the violence-prone areas.

According to a senior DPR official, Nigeria has struggled to remain within her OPEC limit even though she was still running below the quota.

"We had a lot of crisis in May. As at Friday, we were still running slightly below our quota," said the official, adding, "what we do is to give additional quota to companies with spare capacity if a company can't meet up with quota."

Nigeria has an installed production capacity of about 2.6 million bpd. Its new OPEC quota effective June 1, this year was 2.092 million. However, in the aftermath of the Warri crisis, industry officials said that about 300,000 bpd of crude production was still shut in by Shell, ChevronTexaco and Total, over the past two months. In monetary terms, this translates into a daily loss of $6.6 million revenue, given the $22 per barrel official selling price for Nigeria's crude oil.

Furthermore, income from condensate production, (which does not fall under OPEC quota application) has been halted following the fire at ExxonMobil Oso Condensate production platform offshore Akwa Ibom, early last month.

Oil exports account for more than 90 percent of Nigeria's foreign exchange earnings. The Central Bank of Nigeria (CBN), said in its 2002 Annual Reports and Account that following a cut in Nigeria's OPEC quota last year, the country's total exports declined to 545.1 million barrels compared to 674.9 million barrels in 2001. Consequently, revenue stood at N496.3 billion, declining by N438 billion when compared to 2001 earnings.