Nigerian is number five on the list of largest petroleum providers to the
according to Annual Energy Review for 2009 (see e.g., Fig. 5.4 and Table 5.4). According to the EIA’s country analysis brief for USA , oil accounts for over 95 percent of export earnings and about 65 percent of government revenues. Nigeria
Overview of Nigerian petroleum production, consumption and exports
The majority of the oil is located in the Niger Delta where since 2005 there have been substantial domestic conflict involving local militant groups wants a share of the oil revenues. This has lead to attacks takeovers and damage to oil infrastructure and staff, damage to pipelines (e.g., due to “bunkering,” or siphoning oil from the pipeline, similar to that done in Mexico). For instance, in 2009 it has been estimated that, 0.8 mbd of production was lost due to militant attacks—a significant amount compared to a total crude oil production of about 2 mbd (from: Nigeria may struggle to stem future production declines).
In addition to these security issues, government delays in approving new projects (e.g., due to government factions pushing for higher royalty payments from international oil companies), the rate of future developments as may slow hesitate to invest in expensive future exploration and developments:
Managing Director, Mobil Producing Nigeria Unlimited, Mr. Mark Ward, said on Monday in
Abuja, that could see a decline in its upstream deepwater production by 2018, if urgent steps were not taken by the government to promote exploration, drilling and sanctioning of new projects. Nigeria
“The current portfolio of producing deepwater assets were developed within seven to 10 years, whereas fields currently under development or expected to receive Financial Investment Decisions in the near term are projected to take much longer to be brought on stream. Nigerian deepwater lead times are now on average 14 years.”
“Average cycle time of 14 years pushes first oil to 2025. With a decline in
’s deepwater production around the 2018 timeframe, a significant gap could occur.” Nigeria
’S DEEPWATER OIL PRODUCTION MAY DECLINE BY 2018’ NIGERIA
These issues raise uncertainties as to the viability of making long-term investments in
oil production: Nigeria
For all the grandstanding announcements, the devil is in the detail and not much as been said on how the government would apportion a 10% stake of its joint ventures to the people of the Delta. Three decades of corruption and mismanagement of revenue accruing from oil and lack of transparency in detailing how oil money is allocated and spent have engraved a litany of mistrust between the stakeholders.
While efforts to inject greater accountability and transparency in the energy sector have been welcomed, the multinationals fear the tough fiscal terms in the legislation will making
one of the least investor-friendly countries in the world. Nigeria
They say the aggregate impact of multiple taxes, high royalties and loss of incentives under the bill will have a significant negative impact on investments.
may struggle to stem future production declines Nigeria
Therefore, its seems that Nigeria’s recent downturn in production and possibly future production, unlike Mexico or Saudi Arabia, is not due to terminal decline in its oil reserve but rather the inability to pump the oil that it has.
According to the EIA the
USA is the single country largest destination for ’s oil: Nigeria
China is not even on the chart of significant importers of Nigeria’s oil for 2009— India and Brazil take about 10 percent of ’s exports. Nigeria
USA’s share of ’s exports has increased, despite the above-mentioned problems of militants and government approval delays, for the past several years. Nigeria Nigeria’s exports to the as a percentage of net exports for the last five years of data availability (2004-2008) equals 53 ± 2. For the analysis to follow, I have assumed that USA Nigeria’s exports to the will continue in this proportion (53%) going forward. USA
Figure 4 reproduces the
Based on the predicted export trend,
Nigeria’s exports to the by 2015 will equal about 0.30 bbs/yr and only 0.22 bbs/yr by 2020. That is 86% and 63%, respectively, of my estimate of USA Nigeria’s exports to the in 2009 (0.35 bbs/yr). USA
Although the EIA states that 40% of
Nigeria oil goes to the USA, the EIA own energy profile data for Nigeria indicates that a larger percent than this has gone to the for the past several years: USA
Non-linear least squares (NLLS) analysis of total petroleum productionFigure 1 shows total petroleum production for 1965-2009 as reported in the BP statistical review:
, after a local peak in production in late 70s, a subsequent decline in production in the earlier 80s, production has increased through the late 80s and 90s. There are indications of a plateau or rolling over in production since the late 90s. Saudi Arabia
Figure 1 shows the best fit of the Hubbert equation to the 1983-2009 data (solid line best fit parameters: “a” = 0.080; Qo = 6.8; Q∞ = 41.9) as well as the best fit of the Hubbert equation to the 2002-2009 data (dashed line best fit parameters: “a” = 0.244; Qo = 4.2; Q∞ = 14.6). My attempts to fit my modified equation 9 to the data (e.g., similar to that done for Canadian or Mexican production shown in Figure 2 here) did not result in a significantly better fit to the data.
The best fit to the 2002-2009 data looks a lot like the best fit to Mexico’s production data from 1999-2009 (shown in Figure 1 here) and, if the trend held, would suggest a rapid decline production
(e.g., half of peak production in 2005 by about 2012).
However, in my opinion this not the most likely scenario for Nigerian oil production in the coming years because a substantial amount of the recent downturn is due to the above described domestic militant activity. Additionally I found no signs or concerns that
Nigeria has a giant oil field, like ’s Cantarell, that is terminal decline. Mexico
Therefore in the export analysis to follow I have focused on
’s predicted future production based on the NLLS analysis of the Hubbert equation best fit to the 1983-2009 data. Nigeria
Non-linear least squares (NLLS) analysis of total petroleum consumption
Figure 2 shows the best fit of the Hubbert equation to
Nigeria’s petroleum consumption data (as reported in the EIA’s Energy Profile; the BP statistical review did not report ’s consumption as a separate line item). As illustrated in Figure 2, Nigeria ’s internal consumption is very small (about 1/8) compared to its production. Nigeria
The red line in Figure 2 shows the best-fit of the Hubbert equation to the full data set from 1980-2009 (“a” = 0.013; Qo = 5.83; Q∞ = 3032.). Similar to the analysis of
consumption, the unrealistically high value of Q∞ suggests the NLLS best fit using the Hubbert equation blows up because the consumption data follows an exponential increase with no signs of rolling over. Again I could have just as well as fit this to simple exponential equation, but the Hubbert equation fit does a pretty job of doing the same and so I have used this curve for the export analysis to follow. Saudi Arabia
Predicting future trends in Nigerian petroleum exports
Figure 3 shows the best fits obtained using the Hubbert equation analysis of the 1980-2009 time span of consumption data and the 1983-2009 time span of production data as well the 2002-2009 time span of production data.
The predicted export curve (solid green line) is calculated based on the difference between the production curve (1983-2009 Hubbert equation best fit) and the consumption curve, shown in the figure. Additionally, I show the “measured” export data from 1985-2009 time period (i.e., the BP statistical review reported production minus the EIA reported consumption). Also shown is an alterative predicted export curve (dashed green line) based on the difference between the production curve using the predicted production from the 2002-2009 data (solid green line 2002-2009 Hubbert equation best fit).
The predicted production (1983-2009 data) and consumption trends suggests that
’s net exports would end in 2039. Positive net exports drags on for quite a long period (compared to Nigeria Saudi Arabia for example) because ’s domestic consumption is so small relative to its production. Nevertheless, by 2029 a decade before totally ending, net exports are predicted to be below 30 percent of the net exports in 2009. Net exports would end much sooner in 2018, however, if production follows the trend predicted by the NLLS analysis of the 2002-2009 production data. Nigeria
Figure 4 reproduces the
production and consumption trends, plus Canadian, Mexican, Venezuelan and Saudi Arabian petroleum measured and predicted future exports presented from the previous article, Trends in Saudi Arabia Petroleum Production and Consumption. USA
The gold line shows the addition of
Nigeria’s exportable petroleum to the , which equals the predicted total exports (i.e., the solid green line shown in Figure 3) multiplied by 0.53 (i.e., my estimate that 53% of Nigeria’s total exported petroleum will continue to be sent to USA). The gold circles show my estimate of USA Nigeria’s measured exports to the (total measured production minus total consumption, green circles in Figure 3, times 0.53). USA
Based on the predicted export trend,
Although these exports are in decline, the rate of decline is not as severe as a number of the
’s other current top import sources. For instance, if this trend continues, I predict that by 2015 USA Nigeria would over take Mexico, Venezuela and equal Saudi Arabia as the third most important exporter to . By 2020 USA Nigeria would only be second Canada as the biggest exporter to the . USA
For 2010, I predict that
Canada, Mexico, Venezuela, Saudi Arabia and Nigeria’s exports, together with USA’s domestic production, will provide about 65% of the ’s predicted consumption. USA
USA domestic production and imports from these current top five foreign providers will only amount about 54 percent of the ’s predicted consumption. USA
A note of concern about Figure 4
I am becoming increasingly uneasy at the disparity between the actual
USA total consumption reported in the BP statistical review through the decade of 1999-2009 versus sum of total production from the USA and the ’s top export sources as I have progressively added them to this graph. Either my estimates of actual petroleum exported to the USA are way off, or, there have been several additional sources of petroleum exported to the USA that are not among these top five exporters. I can see how my estimate of measured exports to the USA for the earlier measured years depicted (i.e., the early 90s) could be over-estimated for some countries. For instance, I having been estimating measure USA USA exported based on the recent trend for the percent of total exports to the USA (e.g., 75% for Venezuela/Caribbean; 18% for Saudi Arbia; 53% for ). But the percentage of net export from some of these countries (e.g., Nigeria ) has been less than this in the past. Nigeria
But this potential over-estimate of USA exports would not explain under-estimate of nearly 2 bbs/yr of total production by the USA, plus my estimate of exports from its top five exporters, versus the reported total USA consumption from 2004-2009. Where in the world did that additional ~2 bbs/yr petroleum come from for these years?