Nigeria’s rig count surges to highest since 2020 but oil production stuck at 1.3mbd

February 16, 2023 Mary

Nigeria’s oil rig count increased to 13 in January, its highest level since January 2020, according to new data from the Organization of the Petroleum Exporting Countries (OPEC).

According to OPEC’s latest market report, the country’s oil rig count rose by 85.7 percent from seven in September to 13 last month.

The rig count reflects the level of exploration, development, and production activities in a country’s oil and gas sector. Active oil exploration attracts investment and revenues into the country for economic growth.

“Until now, the Nigerian oil and gas sector did not have the required investment. However, the Petroleum Industry Act (PIA) has introduced many fiscal changes and incentives for the industry, especially regarding production,” said Joshua Olorunmaiye, team lead/executive associate, energy and natural resources at Bloomfield LP.

“Thus, one can trace the increase in oil rigs to the passing of the PIA in 2021.”

According to Olorunmaiye, Nigerians can expect even more boost in investment as more exploration activities are expected to occur.

“The increase in investment is particularly owing to the favourable fiscal regime under the PIA, which is such that upstream operators would enjoy higher fiscal rewards based on higher production volumes,” he said.

“This is also naturally going to have a positive effect on Nigeria’s economy, with the contribution of the oil sector to our Gross Domestic Product (GDP) expected to grow, in what has largely been dominated by the services, agricultural and industrial sectors.”

For Etulan Adu, an oil and gas production engineer, the rise in oil rig count is due to increased investment in upstream exploration and demand for crude globally.

“We should be expecting the oil rig count to keep rising due to the recent offer of seven offshore blocks by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that will attract more investment in oil exploration,” Adu said.

Last month, Gbenga Komolafe, chief executive of NUPRC, said the bid for seven offshore blocks would grow the nation’s oil and gas reserves through aggressive exploration and development efforts, boosting production and expanding opportunities for gas utilisation and development.

In October last year, Dolphin Drilling, a United Kingdom-based exploration company, secured a $96 million contract to provide a drilling rig for an oil asset in offshore operations in Nigeria.

According to the offshore drilling company, the charter deal with Nigeria-based General Hydrocarbons Limited will see the Blackford Dolphin rig start operations in the fourth quarter of 2022.

The Blackford Dolphin is a semi-submersible drilling rig of an Enhanced Aker H-3 design built in 1974. The rig is a large structure with facilities to extract and process petroleum and natural gas in rock formations beneath the seabed.

Ndubuisi Okereke, a senior lecturer in the petroleum engineering department at Federal University of Technology, said the offshore drilling company means that more exploratory drilling is beginning to happen offshore, expanding the offshore assets in the country.

He said the increase in oil rig count means that more in-fill wells were drilled from existing oil fields during that period – possibly some of the recently auctioned marginal oil fields.

“The increase suggests that the fight against oil theft is yielding results, and some of our abandoned production lines are beginning to come on stream again. That is a welcome development,” Okereke said.

The rise in the oil rig count in January is linked to the increase in oil production during that period. According to OPEC, Nigeria’s oil production increased by 23,000 barrels per day (bpd) to 1.258 million bpd in January, the highest since January 2022.

The 13-member oil cartel said crude oil output increased mainly in Nigeria, Angola and Kuwait, while production in Saudi Arabia, Iraq and Iran declined.

According to a statement by Energy Connects, Nigeria’s offshore industry will also maintain the momentum of drilling activity it saw in 2022, with five offshore rigs scheduled to be active in the country this year.

The statement said both Shell and First E&P will complete their respective campaigns on Bonga (deep-water, OML 118) and Madu (shallow water, OML 85), but new programs are also on the table.

It said: “General Hydrocarbons has notably contracted the Blackford Dolphin for a drilling campaign at Oyo on OML 120, a shallow water field it hopes to redevelop and return to production quickly.

“Also in shallow water, the Chevron Nigeria JV is seeking a rig to execute a 2-year campaign offshore Escravos starting mid-2023. More importantly, deep-water drilling is also on the table for TotalEnergies, with the major expected to execute an infill drilling campaign on its Egina and Akpo hubs on OML 130. However, the rig is yet to be announced.”

“We are witnessing an upsurge in drilling activity offshore Nigeria since 2022 that we see continuing well into 2023,” Ibrahim Bello, managing director of Caverton Helicopters, a provider of offshore logistics services, was quoted as saying in the statement.

“Based on current appetite from shallow water and deep-water operators, we expect more drilling campaigns to be announced this year.”