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Nigerian oil output falls towards 22-year low as violence spreads

Mon, 09th May 2016 17:51

By Libby George

LONDON, May 9 (Reuters) - A series of attacks on Nigeria'soil infrastructure has pushed its output of crude close to a22-year low, Reuters data shows, putting intense pressure on thecountry's finances.

Shell workers at Nigeria's Bonga oilfield in the southernNiger Delta were evacuated following a militant threat, a seniorlabour union official said on Monday, while attacks late lastweek forced Chevron to shut its Okan offshore facility, takingout 35,000 barrels per day (bpd).

While Shell said the latest unrest had not yet impactedproduction, its Forcados field is still closed and under forcemajeure following a February subsea pipeline attack, taking out250,000 bpd.

The violence has depressed production in what is typicallyAfrica's largest producer to roughly 1.69 million bpd in May,the lowest since at least June 2007, when production fell to1.68 million bpd, International Energy Agency data shows.

A small reduction from any field would quickly send outputto the next low, seen in August 1994, when it hit 1.46 millionbpd, according to the IEA data.

"It's really not a good situation," said Eugene Lindell,senior energy analyst with JBC Energy in Vienna, noting that theglobal excess of crude was keeping Brent prices from movingsignificantly higher on the back of the outages. "They have lessproduction, and they're getting less bang for their buck."

The country's 2016 budget, signed into law just last week,assumes 2.2 million bpd of oil production at $38 a barrel. In acountry analysis released late last week, the U.S. EnergyInformation Administration noted that pipeline sabotage and oilsupply disruptions had increased in 2016, putting directpressure on the country's finances.

"Because Nigeria heavily depends on oil revenue, its economyis noticeably affected by changes to its oil production and/orto global crude oil prices," the report said.

President Muhammadu Buhari has said there would be acrackdown on "vandals and saboteurs" in the country'soil-producing Delta region, analysts said the violence couldscare investment away from the country.

"If it continues like this ... there are companies who willprobably not consider Nigeria" for upstream investments, Lindellsaid. (Additional reporting by Alex Lawler, editing by David Evans)

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