Almost half the shortfall in planned oil supply by OPEC and
its allies is down to Nigeria and Angola, data seen by Reuters shows,
reflecting a number of factors including moves by Western oil majors away from
African projects.
According to the figures, Angola was responsible for almost
300,000 bpd of the OPEC+ supply shortfall while Nigeria was pumping almost
400,000 bpd below target. The war in Ukraine has also hit Russia's oil trading
and its output was about 300,000 bpd short of its March supply target.
The OPEC+ shortfall is one of the reasons global oil prices
hit a 14-year high in March above $139 a barrel and it has prompted calls by
the United States and other consumers for producers to pump more.
The Organization of the Petroleum Exporting Countries,
however, has repeatedly rebuffed the calls - and one contributing factor is
simply that some of its members don't have oil available to pump.
In OPEC's view, investment cuts after oil prices collapsed
in 2015-2016 due to oversupply, along with a growing focus by investors on
economic, social and governance (ESG) issues, have led to a shortfall in the
spending needed to meet demand.
"There was massive underinvestment in the industry over
the years, further complicated by the effect of ESG," OPEC Secretary
General Mohammad Barkindo told Reuters.
"There was a contraction of 25 per cent in 2015 and
2016 - unprecedented. There was no significant recovery before 2020, when we
registered a 30 per cent contraction in investments in the industry," he
said.
Figures from the International Energy Agency (IEA) show
there was no significant increase in investment in global oil and gas
exploration and production during 2017-2019 - followed by a 32 per cent plunge
in 2020.
International oil companies are gradually pulling out of
Nigeria's onshore oil production, although they continue to invest in its vast
offshore oil and gas resources, where costs remain competitive.
Shell, which helped transform Nigeria into a leading
producer since the 1930s, did not immediately respond to a request for comment
about investment and the reasons for the decline in Nigerian output.
GULF PRODUCERS BOOST INVESTMENT
OPEC's Gulf producers led by Saudi Arabia are largely
meeting their OPEC+ targets, and OPEC sources say their relative lack of
dependence on outside investors has helped.
"The investment shortfall affected more the countries
where reliance on foreign investment is more prominent," an OPEC+ source
from a Gulf producer said.
IEA figures show that in 2019, final investment decisions
(FIDs) affecting over eight times more crude reserves in the Middle East were
taken than those affecting African reserves.
Middle East approvals were also consistently higher from
2011 through 2018.
"Saudi Arabia, the United Arab Emirates and Kuwait are
increasing investment and that to some extent can help offset declines
elsewhere," said Audun Martinsen, analyst at Rystad Energy.
"It also highlights why OPEC is not intervening more
because it is quite hard for OPEC to increase production overnight,"
Martinsen said.
Angolan state oil company Sonangol and Nigeria's state oil
firm NNPC did not immediately respond to Reuters requests for comment on their
production decline or the reasons for it.
According to a 2021 report from the Arab Petroleum
Investments Corporation or APICORP, Middle East and North African producers
were still expected to boost energy investment to $805 billion in 2021-2025 -
up $13 billion on the previous year's five-year outlook, despite the impact of
the pandemic.
In February, Saudi Arabia-based APICORP said it expected
rising oil and gas prices to further support energy investment in the region.
TOO MUCH RISK
While Western majors are increasingly focusing on the energy
transition and selling oil assets, they remain big producers in Africa. Big Western
companies are responsible for 40 per cent of output in Nigeria and 60 per cent
in Angola, according to Rystad.
Rystad sees some potential for new investment in Nigeria and
Angola but projects remain "too expensive" for the majors.
"Since 2015 the majors have been focusing on cost and
developing things in Africa has been too much of a risk with cost
overruns," Rystad's Martinsen said. "It's not really part of their
key focus any longer."
Angolan production has fallen 50 per cent since 2015 and
output is down by about 30 per cent over the same period in Nigeria, he said.
In Nigeria production is expected to grow slightly by 200,000 bpd in the coming
years, but then decline again after 2024.
Shell said last month that oil spills arising from pipeline tapping
in the Niger Delta doubled in 2021 to the highest since 2016.
Underlining the extent of the decline, exports of key
Nigerian crude grade Bonny Light have fallen to just two or three cargoes a
month from about eight or nine previously as a result of escalating oil theft.