Exxon has declared a force majeure on oil liftings, potentially tightening supply, while the issue of June loading programmes was in focus.
This development which will worsen Nigeria’s crude oil situation will halt liftings from different terminals in the country following industrial action by the company’s in-house workers union.
Exxon is the operator of Qua Iboe, one of Nigeria’s larger crude streams but Trade sources were not sure as yet whether any output had been shut down and what would be the impact on loading programmes.
Qua was last heard offered on Friday at dated Brent plus $2.25 to $2.50 depending on dates. A trader said on Monday levels had not changed.
ExxonMobil has been trying to sell $1.2 billion in shallow-water assets in “challenging” Nigeria, the company told Reuters in February, while keeping deep-water assets further from the coast.
Spokesperson Michelle Gray in a statement on Monday said that the company was exploring ways of resolving the issues with its workers.
“We will continue to take all reasonable actions necessary to resolve the impasse as soon as possible,” Gray said on Monday.
Meanwhile, crude oil production from the Organisation of Petroleum Exporting Countries (OPEC) and allies fell by 300,000 barrels per day in March as sanctions hit Russian output, the latest Platts survey by S&P Global Commodity Insights, has found.
Such a strike action would further compound the situation in the country, as the industry has been struggling to meet its OPEC production quota
OPEC production decreased 60,000 bpd to 28.97 million bpd, while non-OPEC allies saw output fall by 240,000 bpd to 13.40 million bpd in March, S&P stated.
Nigeria recorded its first crude oil production decline in six months in March this year, the first time since output nearly fell to 900,000 barrels per day in September last year, data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), showed.
The country’s production declined to 1.26 million bpd during the month, indicating a 2.9 percent decrease from the over 1.3 million bpd recorded in February.
The figure released by the nation’s upstream regulatory agency differed markedly from an earlier Reuters survey which stressed that Nigeria was nearing its 1.6 million barrels per day target in the first quarter of 2023.
While the Organisation of Petroleum Exporting Countries (OPEC) production allocation to Nigeria remains at about 1.8 million bpd, the country’s output in February was roughly 1.3 million bpd, still short of the cartel’s expectation.
But the S&P survey stated that recovery in Kazakhstan’s production partially offset Russia’s significant drop in production on the non-OPEC side
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In 2022, President Muhammadu Buhari reversed his earlier authorization of Seplat Energy Plc’s $1.28-billion purchase of Exxon Mobil Corp. assets and backed the energy regulator’s decision to reject the deal.
Buhari who also serves as oil minister approved Seplat’s acquisition of Exxon’s shallow-water business on August 8, 2022, but the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, contradicted the decision.
The agency’s chief executive officer, Gbenga Komolafe, said in a statement that its previous rejection of the proposed transaction remained in place.
Exxon began oil operations in Nigeria in the 1950s and, alongside Shell, was responsible for the creation of the oil industry that has become the bedrock of the Nigerian economy.
Oil production in the swamps of the Niger Delta in the south of the country has generated billions of dollars in revenues for the companies and the government but has also resulted in corruption, violence, and criminality that international oil groups have found increasingly difficult to manage.
In response, ExxonMobil and Shell in the past two years have announced plans to end their onshore operations, while continuing offshore projects. The planned divestments provide an opportunity for local producers such as Seplat to expand.
But Exxon and Shell have also been criticised for leaving behind a swath of environmental, social, and operational problems.
Shell’s planned divestment of its Nigeria assets has been put on hold pending the resolution of its appeal against a court order to pay $1.95bn of damages after an oil spill in 2019.
Seplat reached an agreement to buy Exxon’s shallow water assets in February last year but the deal appeared in doubt after the Nigerian National Petroleum Company Limited, the state oil company, secured a court order barring Exxon from selling the four licenses.
Exxon operates the permits in a partnership with NNPCL which had sought to block the transaction, arguing that it had a contractual right to pre-empt any sale.
Seplat, which is listed in both London and Lagos, had earlier welcomed Buhari’s decision, describing the deal as “a transformational transaction” that would create “one of the largest independent energy companies” on both stock exchanges.
The acquisition would have increased Seplat’s oil production by roughly 95,000 barrels a day, tripling its output.
Buhari earlier also said the deal would also boost Nigeria’s ambitions to receive more foreign direct investment in the energy sector.
In the short-term Exxon and Seplat are expected to work together to boost production at the four fields, thereby helping Africa’s largest oil producer meet its OPEC production quota of 1.8mn barrels a day, it added.
Nigeria has struggled with this target because of pipeline vandalism and theft in the Niger Delta region.
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