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Nigerian oil output falls 6% in July as pipeline closures persist

Highlights

July production falls 89,256 b/d to 1.31 million b/d

Bonny Light hits lowest level in decades, force majeure still in effect

Political risks could deteriorate ahead of 2023 elections

Nigerian crude oil output fell 6% month on month in July as pipeline closures and maintenance at major fields continued to impede Africa's largest oil producer, industry sources said Aug. 8.

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A senior official from the country's oil ministry told S&P Global Commodity Insights the field that feeds the major export grade -- Bonny Light -- remains heavily disrupted.

Nigeria has had to deal with a barrage of security, operational, and technical problems at its key oil infrastructure since early 2021.

Crude and condensate production in July fell to 1,314,074 b/d, from 1,403,330 b/d in June, according to Nigerian Upstream Petroleum Regulatory Commission data.

Nigeria has seen its crude and condensate production drop to almost half its production capacity of about 2.2 million b/d.

In mid-July, the Chief Executive Officer of the state-owned energy firm Nigerian National Petroleum Co. Ltd., said the country was losing over 400,000 b/d to pipeline sabotage and theft.

That has led producers to scale down investment in the country's main producing Niger Delta region.

Bonny outage

Most key oil fields, terminals and facilities have been experiencing teething problems and a recent resurgence in attacks on oil facilities has exacerbated the situation.

Crude exports of the Bonny Light grade have been on force majeure since mid-March following sabotage attacks on its key pipelines.

Bonny Light production averaged just 30,321 b/d in July, the lowest in many decades, compared with 40,083 b/d in June. Bonny Light output normally averages as high as 250,000 b/d.

The 150,000 b/d Nembe Creek Trunk Line feeding one of Nigeria's key export grades has come under repeated attack from militants.

The grade has a gravity of 32.9 API, sulfur content of 0.16%, and is known for yielding a large percentage of gasoil, distillates, and vacuum gasoil.

Risks could escalate

Rising pipeline sabotage and insecurity in the Niger Delta have also hampered the growth outlook for Africa's largest oil producer.

Platts Analytics in a recent note said it expects Nigerian crude supply to rise to 1.5 million b/d in the first quarter of 2023.

"Political risks may worsen ahead of elections in early 2023," Platts Analytics said. "Production has averaged around 300,000 b/d below its OPEC+ quota since mid-2021 ... Loadings remain low despite the start-up of the Ikike field in July, feeding into Amenam loadings."