Nigeria has been dethroned as Africa’s largest oil producer.
Nigeria’s oil production is now below that of Angola after various attacks on energy infrastructure by a new militant group called the Niger Delta Avengers, according to the BBC.
Data cited by RBC Capital Markets’ commodities team in an early-May research note shows that Angola’s oil production held steady in April at 1.8 million barrels a day while Nigeria’s slipped to 1.69 million b/d.
And Nigeria’s has fallen even further since. Production is down to 1.4 million b/d, according to a Monday report from Reuters Africa.
These outages reflect the deteriorating political and security dynamics that pose an immediate threat to Nigeria’s oil output. And they come as the country continues to suffer from numerous economic headaches including lower oil prices and the government’s controversial foreign-exchange and price-control policies.
- RBC Capital Markets
Since the Buhari administration ordered an arrest warrant for members of the Movement for the Emancipation of the Niger Delta, or MEND, including the ex-leader Government Ekpemupolo, the country has seen a spike in attacks on oil facilities this year. Most notably, there was an attack on a Chevron offshore facility last week and one on the Forcados export pipeline operated by Shell back in late March. The Avengers have taken credit for both attacks.
The group reportedly wants locals in the Niger Delta to have more control over oil resources in the region and higher living standards along with the continuation of the Niger Delta amnesty program, as Bank of America Merrill Lynch’s Oyin Anubi wrote last week.
The Avengers’ agenda seems to echo that of MEND’s back in the day. At the time, MEND portrayed itself as a “political organization that wants a greater share of Nigeria’s oil revenues to go to the impoverished region that sits atop the oil,” according to The Economist. (Though, interestingly, Anubi cited local press reports noting that Ekpemupolo had tried to distance himself from the Niger Delta Avengers, who aren’t part of the existing Niger Delta Amnesty program.)
As for what this means for the oil market, some analysts think we may see more outages going forward.
- RBC Capital Markets
“With the pace of militant attacks on Nigeria’s energy infrastructure accelerating rapidly, we believe that there is now a significant chance that the country could see the type of production outages that occurred during the peak of the MEND insurgency,” the RBC Capital Markets team led by Helima Croft wrote in a note to clients.
“While this large-scale disruption appears temporary, outages in Nigeria may persist,” the team added. “Recent outages have escalated, forcing Nigerian crude oil production to multiyear lows.”
(At the height of its activity, MEND slashed Nigeria’s output by 50% and cost the government $19 million in daily defense outlays, according to previously cited data from the team.)
“While the oil market has not priced in a supply disruption risk premium over the past 18 months given ample global crude oil inventories, acute and lengthy unplanned outages may soon become too large to ignore,” the team concluded.