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Nigeria Economy Commentary - How much crude oil can Nigeria produce in 2018?

Stronger oil prices since the start of 2017 have been enabled by the joint output agreement between the Organization of Petroleum Exporting Countries (OPEC) and large non-OPEC nations such as Russia. Having been exempted from the deal during its first year as the country recuperated its oil production, Nigeria has been handed a joint quota of 2.8 million barrels per day (mmbd) with Libya, another country exempted through 2017. Considering the Federal Government’s 2018 Budget target of 2.3 mmbd, we assess how much crude oil the country can produce this year in light of the output constraint imposed by OPEC. 

Based on historical output, Nigeria can lay claim to at least 1.8 mmbd of the OPEC cap, leaving the remaining 1.0 mmbd to Libya. The OPEC cap excludes Nigeria’s condensate output. Meanwhile, the budget benchmark of 2.3 mmbd is inclusive of condensates. Therefore, to operate within the OPEC limit and still achieve its budget target, Nigeria would need to produce at least 0.5 mmbd of condensates.                                       

Direct estimates from the Nigerian National Petroleum Corporation (NNPC) and the JODI Oil Database for the 6-year pre-militancy period (2010-2015) peg average condensate production at 495 thousand barrels per day (kbpd). But using NNPC estimates of total oil production and OPEC estimates of Nigeria’s oil production in the same period, we can estimate average condensate production of 428 kbpd. More recent figures are equally divergent. Using 2017 oil production estimates provided by the National Bureau of Statistics (average: 1.88 mmbd) and OPEC (average: 1.67 mmbd), condensates production lies close to 204 kbpd. This is despite comments by the Minister of State for Petroleum Resources suggesting condensate output was as high as 350 kbpd at the end of 2017. All things considered, it is unclear how much Nigeria produces in condensates. The difference between Ministry of Petroleum Resources and OPEC estimates of Nigeria’s January oil production is 251 kbpd.

Our base expectation at present is for the OPEC deal to last through the year and Nigeria’s total crude production to average 2.05 mmbd. Realised production volumes would affect government revenue performance which would, in turn, affect budget implementation. In addition, oil remains Nigeria’s largest source of foreign exchange so any shortfalls here would impact the economy.