OP-ED: Finding Nigeria’s elusive incremental oil barrels

Context

Nigeria has historically struggled to meet its OPEC production quota consistently, undermining efforts to stabilize government revenues. The 2025 federal budget assumed crude oil output of 2.06 million barrels per day (mbpd) at a benchmark price of $75 per barrel, forming the basis for ambitious spending plans.

Actual production has trailed expectations. Year-to-date average output stands at ~1.68 mbpd, about 18% below budget assumptions. This variance has created significant revenue shortfalls and contributed to a fiscal deficit of over $8 billion by the third quarter of the year.

The government plans to cover the gap through domestic borrowing – tapping local debt markets – which may increase interest rate pressures, external borrowing – which potentially increases exposure to foreign exchange risks and from privatization proceeds.

But the only sustainable solution is to grow production and do so linearly and organically.

Unfortunately, commercializing Nigeria’s vast hydrocarbon resources for sustained economic growth and revenue generation remain an operational tailspin.

Government’s Strategic Intervention and Results

 To strengthen Nigeria’s oil sector competitiveness and investment appeal, the Presidency has consolidated a suite of tax incentives, cost-optimization measures, and local content compliance initiatives into seven strategic directives, championed by the President’s Energy Adviser.

Yet none of these have translated into any marked improvement in the key upstream performance metric – Production increase.

 Base period data in May 2025 indicates Nigeria’s total oil output (crude + condensates) stood at approximately 1.66 million barrels per day (bpd), with crude oil comprising around 1.455 million bpd according to Proshare. Crude oil production rose to approximately 1.51 million bpd in June, marking a 3.6% month-on-month increase, while condensate output dipped slightly to around 191,572 bpd, for a combined total near 1.70 million bpd.

Production continued to climb modestly in July but reported averages vary. NUPRC figures reported Crude oil ~1.507 m bpd plus condensates approximating 204,864 bpd for a combined total of 1.71 m bpd, reflecting a 0.89% month-on-month gain and a 9.9% year-on-year boost from July 2024. Reuters however cites a higher output of ~1.78 m bpd, the highest since November (attributed partly to enhanced security measures reducing theft).

Clearly, the industry reveals a cautious yet upward trajectory, with June marking a notable rebound and July consolidating that progress. The YoY increase of ~9.9% between July 2024 and 2025 underscores improvement mostly attributable to significantly improved terminal factors, though production remains way below budget forecasts (2.06 m bpd) and long term targets.

Incremental barrels sought after may be hiding in plain sight

Historical divestments demonstrate that success is anchored on disciplined field level-execution. A time-tested strategy for stemming natural decline and growing production is to develop robust work programmes/rig schedule with candidates that captures expected production growth/reserves addition from each candidate.

 The NNPC’s Project Fit for purpose is advancing very aggressive and targeted actions to close production gaps in line with national priorities. Their proposed strategy for near-term production gain focuses on unconstrained recovery of oil with consideration to reserves size and operator efficiency. Incremental volumes are anticipated from efficient WRFM / intervention on a handful of NUIMS Joint Venture and NEPL controlled assets.

But a constituted government committee overseeing the divestment of select assets in NNPCL upstream asset portfolio seemingly takes a contrasting view to adopting a sound field-level farm-down approach. It proposes that NNPCL divest a minimum of 25% of its equity in select Joint Ventures (OML-Level) to investors. What it fails to outline is how production growth will be achieved following these divestments. The Federation approved large-scale, OML-level or contiguous asset packages divestment strategy without addressing how work execution will be driven to attain oil production growth in the short term, may be overly imprudent.

Implementing a field-level farm-down strategy—anchored on clustering at least two fields per unit and meeting defined 2P reserves thresholds—provides a more robust foundation for Nigeria’s Asset Optimization Strategy. This reserves-based, clustered approach strengthens technical discipline and is critical to delivering the 2 mbpd target by 2027 and 3 mbpd by 2030.

Getting granular simplifies complexity

Addressing the 0.22–0.29 mbpd oil production shortfall—depending on data source—calls for a streamlined approach that reframes what has historically been a lingering complex issue.

Insights from a critical analysis of past divestments show that success is driven by focused, field-level development rather than broad block/OML-Level sales. Notable examples include First E&P’s phased development of OMLs 83–85, and Elcrest (OML 40), which scaled production from 3,000 to over 30,000 bopd through phased, field-specific strategies. These cases underscore that replicating technically driven, field-level execution is central to maximizing value in future divestments.

At Ofserv, we advocate a balanced, agile approach to near-term production growth—integrating targeted field-level farm-downs with OML-level restructuring, underpinned by rigorous technical and financial analysis. A pragmatic framework must emphasize granular development strategies, detailing candidate wells, reservoirs, activities, and expected volumes rolled up per reservoir, per well.

Equally critical are ethical, responsible operatorship and committed capital deployment to ensure timely, measurable production gains.

With recent security gains in the oil producing areas, maximizing improved terminal factors should be a national priority. Achieving this requires a queue of coordinated and execution-ready subsurface work programs, incentivized by industry and government stakeholders aligned on policies that serve the collective good.

Ofserv seeks to partner with sector players to accelerate production growth, unlock vital liquidity, and strengthen the foundation for Nigeria’s long-term fiscal stability.

Dimeji Bassir is Chief Executive at Ofserv, a Nigerian based advisory and technical consultancy organized to harvest opportunities across the E & P Value Chain. Our strategy centers on deploying technology to maximize oil and gas lifecycle value, improve hydrocarbon recovery and grow reserves.