Nigeria sees deepwater gas production drop to 41.65bscf

Data analysis from the Nigerian National Petroleum Corporation (NNPC) has shown that the volume of natural gas produced from the nation’s deepwater oil fields has hit its lowest level in at least five years.

The deepwater gas production plunged in April 2020 to 41.65 billion standard cubic feet (1.44 billion standard cubic feet per day) amid the coronavirus-induced collapse in crude oil prices and demand from 45.38 bscf (equivalent of 1.56bscf/d) in March.

The recent collapse in crude oil prices added pressure on Liquefied Natural Gas (LNG) prices, some of which are linked to oil.

The demand for Nigeria’s LNG cargoes in Europe, one of the country’s key markets, tumbled as buyers defer red deliveries amid the lockdown introduced by many economies.

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, said in March that over 12 LNG cargoes were stranded in the market globally, for the first time ever.

The nation’s oil and gas production structure is majorly split between Joint Ventures (onshore and in shallow waters) and Production Sharing Contracts (PSCs) in deepwater offshore, to which many international oil companies have shifted their focus in recent years.

Deepwater PSCs currently account for about 40 per cent of Nigeria’s oil production, rising from zero in 2004 to about 780,000 barrels of oil equivalent per day, according to Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry.

The deepwater oil fields account for about 22 per cent of the total gas production in the country, the NNPC data showed.

Under the PSCs, the NNPC is the oil licence holder but engages oil firms as contractors that bear all risks and recover costs through a share of production at a tax rate of 50 per cent.

The NNPC said a total of 226.51 bscf of natural gas was produced in April, translating to an average daily production of 7.79 billion scfd.

“For the period April 2019 to April 2020, a total of 3,082.91 bscf of gas was produced, representing an average daily production of 7,857.18 million scfd during the period.

“Period-to-date production from Joint Ventures, Production Sharing Contracts and NPDC contributed about 69.57 per cent, 21.46 per cent and 8.97 per cent respectively to the total national gas production,” it stated.

Nigeria has the largest gas reserves in Africa and the ninth largest in the world but only about 25 per cent of the reserves is being produced or under development.

The country’s total gas reserves stood at 203.16 trillion cubic feet as of January 1, 2020, up from 202Tcf in 2019, according to the Department of Petroleum Resources (DPR).

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