Nigerian media reports halt to some crude oil production

OPEC-member coping with mounting security concerns in an oil sector, where weakness last year damaged the nation's economy.
By Daniel J. Graeber  |  July 27, 2017 at 9:17 AM
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July 27 (UPI) -- Nigerian media reported Thursday the federal government opted to halt crude oil exploration in part of the Niger Delta because of heightened security concerns.

Militants struck a crude oil pipeline in Nigeria early this week, sidelining more than 100,000 barrels of oil per day. On Wednesday, militants abducted dozens of oil contractors working for the Nigerian National Petroleum Corp., though security forces were said to have conducted a successful rescue mission.

Nigerian news service This Day reports nine soldiers and one civilian were killed during the operation.

Nigeria is a member of the Organization of Petroleum Exporting Countries, but is exempt from a multilateral agreement to stem production because it needs oil revenue to fund national security efforts. Improvements late in the first half of the year brought calls to rein in production, though media reports the government ordered cut backs for the sake of security.

"The federal government on Thursday said it has suspended crude oil exploration in the Borno State and would only resume if it gets sufficient security clearance guaranteeing the safety of its personnel and operations," Nigerian news service Vanguard reported.

According to Vanguard, the success of the rescue operations hasn't been confirmed.

During weekend meetings for a OPEC monitoring committee, Nigeria said it would put a ceiling on production once its output stabilized at 1.8 million barrels per day. The head of the Nigerian National Petroleum Corp. said last week production already topped 2 million barrels per day.

The government this week initiated a new mechanism to address fluctuations in the crude oil market and possibly divert away from crude oil exports and toward refining of petroleum products. The government may also consider converting some joint venture programs to production sharing contracts.

"Under the petroleum policy, the government will agree to a cap on the proportion of petroleum revenue that can be spent on current expenditure," a statement published by This Day read. "From the remainder, the government will put aside an agreed percentage of petroleum revenue to the sovereign wealth fund, to be dedicated for capital items and for future generations."

The Nigerian economy sank into recession last year, with a contraction of 1.6 percent. With oil production centers in the Niger Delta the target of rebels, production faltered last year and the economy was hard hit by the strains of weaker crude oil prices.

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