Storing up trouble: how long can Nigerian production be sustained? Report

Insight 13 May 2020

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Report summary

Nigeria’s oil producers are in a crisis the like of which even they have not seen before. That’s some claim for a country that has suffered dramatic supply outages in its recent history. The huge over-supply and demand destruction which has affected the global upstream industry is still to unwind itself and current prices are not enough to cover production costs for many. Even so, Nigeria's producers are resilient - we think production shut-ins are unlikely. The biggest risk is declining storage space as a backlog of cargoes builds. NNPC is particularly impacted by its lack of downstream integration while the IOCs are continuing to lift crude for now. There are signs of recovery in global market fundamentals, but higher prices are needed soon to avoid production constraints.

Executive Summary
Short-run costs are not being covered
Why shut-ins are unlikely for now
Plummeting prices
- Lack of integration hurts NNPC
- Integrated IOCs fare better
Storage fill poses a growing risk
Is recovery on the way?