Nigeria’s oil rig count plunge 30%


By Prince Okafor

Nigeria’s active rig count witnessed a downward movement with a 30 percent dip to seven in October, 2020 from 10 recorded in September.

The rig count is a reflection of the level of exploration, development, production and general activities taking place in the upstream petroleum sector.

This shortfall is coming at a time the Organisation of Petroleum Exporting Countries, OPEC, also witnessed a significant drop in its rig count to 325 in October against 363 recorded in September, according to the latest OPEC monthly oil market report.

However, world rig count recorded a slight shortfall of two, dropping to 1,135 in the latest count, as against 1,137 recorded the previous month.

Meanwhile, stakeholders at the Nigerian Association of Petroleum Explorationists, NAPE, warned that the continued reduction in oil and gas exploration activities in Nigeria would have huge consequences for the country.

According to Lukman Otunuga, Senior Research Analyst at FXTM, “Nigeria is at risk of long-term disruption to oil and gas supplies, power generation, a collapse of industries and significant loss of revenue due to continued reduction in hydrocarbon exploration activities.

“Reduction in hydrocarbon exploration and exploitation has dire consequences for a country like Nigeria with a mono-economy hinged on crude oil.”

“With Oil prices capped by demand-side factor, the International Monetary Fund’s 2020 growth forecast of -4.3 percent could become reality.

“Outside of Nigeria, the most important risk event that remains relevant to the country is the upcoming OPEC+ Joint Ministerial Committee meeting. While OPEC+ is unlikely to make any major decisions, the meeting may provide plenty of noise which could translate to price volatility.

“One thing to keep in mind is that Nigeria oil production has fallen sharply due to ongoing OPEC+ output cuts. The latest figures from the cartel confirm that Nigeria is sticking to supply cut agreements by keeping oil production below 1.5 million barrels per day in September.

“Given how oil sales account for a handsome chunk of export earnings and government revenues, this development is likely to compound the country’s woes,” Otunuga stated.

Earlier in the Naija247news reported that the contracts for the jackups Gerd and Groa offshore Nigeria, ExxonMobil has effectively inaugurated the widely anticipated reduction of the Nigerian rig activity.

Gerd and Groa, owned by Borr Drilling, were on locations in Asasa and Oyot fields in Oil Mining Leases (OMLs) 67 and 70 respectively, as of early April 2020.

Now other announcements of terminations of rig contracts by other companies are expected to follow, as market conditions worsen.

The two Borr rigs were under contracts originally committed until April 2021 and May 2021. The contracts for both rigs require 180-day notice for early termination.

Borr, a New York Stok Exchange listed company, says it is in discussions with ExxonMobil with regards to planning the discontinuity of operations.

Nigerian rig activity was at a three year high in January 2020, with 32 rigs in various stages of operations on as many locations.

But the combination of COVID-19 and a price war has, since then, has gutted the hydrocarbon industry worldwide, with cargoes of crude oil sloshing around looking for buyers.