Fakoyejo OlalekanBan on Russian oil from Europe has created an opening for oil thieves in Nigeria, Nigerian government and members of Organization of the Petroleum Exporting Countries (OPEC) and allies, OPEC+, to raise their oil revenue.
European Union members had hit Russia’s production level with an embargo on 90% oil export, in defense of Ukraine, against Vladimir Putin’s country, to block some of the nation’s financial source used to finance the invasion and war in Ukraine.
Russia production output is put at 9.16 million barrels per day (bpd)as of April 2022, and the country counts about 524 million tonnes in twelve months 2021, and half of Putin’s oil produced per day goes to European market, making EU members the biggest trade partner of Russia.
However, with that partnership hitting the rock due to the invasion of Ukraine, Russia will have to drop its production level. Already, there are projection that the oil level will dip -17%, but Russian oil company, Lukoil has suggested -30% cut to help Russia get better price in the global market.
Amid this projected cut, are members of OPEC and OPEC+, such as Nigeria, that could take advantage of a drop in Russia’s production output, by increasing their quota for the remainder of the year, to cover the gap caused by the EU embargo and possible cuts in Russia.
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As of April this year, Nigeria produces 1.3 million barrels per day, a significantly low level when compared to Russia’s 9.16 million bpd. Note that OPEC and OPEC+ countries are sometimes, advised to step down or hike their production level by an agreement, in a bid to control price.
Nigeria for example, pumped less oil in April, in contrast to the 1.5 million bpd recorded in the corresponding period of 2021; this is a -13.3% dip in the country’s production output, which in turn, reduces the revenue generated from the global oil market – this might change with the Russian embargo.
It was gathered that Nigeria had earned N337.6 billion as domestic crude oil and gas revenue, while counting $29.94 million for export revenue for the month of April, as it was only able to produce 78% of its OPEC quota.
For the country to be able to earn from the setback suffered by Russia, the Nigerian government wouldn’t only request for a hike in its production volume, considering it has the capacity to produce 2.3 million barrel per day, but also fix its sabotage situation, which causes massive oil theft in Niger Delta region, the oil base of the country.
Nigeria produces 1.9 million barrel per day, but only 1.35 million barrels reaches the terminals for export. The impact of this oil theft was broken down by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Chief Executive, Gbenga Komolafe, four days ago.
During the Iwereland Petroleum Communities Summit of the Host Communities’ Development Trusts, he said the government lost about $1 billion (N479 billion) to crude oil theft in Q1 2022, after 9 million barrels were stolen from the 141 million barrels produced in the first quarter.
“in the first Quarter of 2022 alone, out of about 141 million barrels of oil produced and a total of about 9 million barrels of oil was lost to crude oil theft. This amounts to a loss in Government revenue of about 1 billion United States Dollars (at $116 per barrel) or about N434 billion (at CBN rate of N 415/$) which is about 90% the size of Delta State’s budget of N479 billion for the 2022 fiscal year.”
So while the EU embargo placed on Russia, and the cut expected to trail the decision creates an opening for Nigeria to increase its oil revenue, it also opens up the chance for persons inevolved in the oil theft to increase their gains from the stolen crude – unless the government fills the loopholes.
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