The Organization of the Petroleum Exporting Countries (OPEC) had a meeting in Vienna with a resolution by members to keep production outputs unchanged in a bid to ensure long-term stable and balanced oil market for both producers and consumers.
The meeting presided over by Nigeria’s Minister of State for Petroleum Resources, Ibe. The group opted to delay the decision to raise its output ceiling from 30 million to 31.5 million barrels per day till next meeting in June.
Continued drop in crude oil prices has had a continuous negative impact on the economies of Nigeria, which depends on oil exports as the main source of revenue. During the meeting, members reviewed the oil market outlook for 2015, with global economic growth currently at 3.5 per cent, while the projections for 2016 revealed demand expansion by 3.4 per cent.
In terms of supply and demand, the Secretariat report showed that non-OPEC supply was expected to contract in 2016, while global demand is anticipated to expand again by 1.3 million barrels per day. Mr Ben who headed Nigeria’s delegation to the meeting said a more balanced market could be achieved if demand for OPEC crude was increased by 1.2 million barrels per day. Mr Ben posited that a balanced stable market would be of crucial importance in the years ahead to ensure continued investment in the industry.
Nigeria’s government revenue fell 15 percent in December 2015 as falling oil prices eroded the in the income of Africa’s biggest crude producer. Revenue fell to 398.6 billion naira ($1.9 billion) in December compared with 390 billion naira a month earlier, Accountant General Jonah Otunla said in an e-mailed statement. The volume of oil exports declined 33 percent in November and December resulting in $159million of lost revenue, Otunla said.
Nigeria has “suffered a substantial loss in revenue as a result of the massive drop in crude oil price at the international oil market” he said. The continent’s largest economy has been hit by having in Brent crude oil prices since the middle of last year. Nigeria relies on export of the commodity for more than 90 percent of foreign exchange income and 70 percent of government revenue.
The balance of Nigeria’s oil savings Excess Crude Account is currently about $2.1 billion, down from $4.1 billion in December. Total revenue distributed among the three tiers of government in January was 500.1 billion naira, including value-added tax and refunds by the state-owned Nigerian National Petroleum Corp.
The price of oil, now in the neighborhood of $30 per barrel, is getting close to its production cost in Nigeria and soon may lead to the shutdown of some of the country’s oil fields, according to some energy executives and financial institutions.
The Central Bank of Nigeria’s latest figures show that the price of Nigeria’s crude, Bonny Light, has dropped to $29.47 per barrel. And several financial services companies, including Bank of America, Merrill Lynch, City Group, Goldman Sachs and Morgan Stanley say it could drop further to $20 per barrel. One oil executive Bakar, told Nigerian Newspaper Punch that the current price isn’t much more than it costs to extract the oil.
“The unit technical cost of many of our producers is not far from $30 per barrel,” said Bakar, the project director for the Uqos gas field development, a joint venture project by Frontier Oil Limited and Seven Energy. “So many companies are in trouble.”
According to Bakar, extracting a barrel of oil in Nigeria costs between $24 and $25 on average but sometimes will cost more. For some fields, the production cost is well above $25, maybe $28, he said. For some fields it is well below $20 and $25. Many of the older fields have got high production costs.
The low oil prices also threaten to delay several deep-water projects planned off Nigeria’s coast. Ade, the CEO of Petrosystem Nigeria Ltd, said, “What international oil companies have done now is to just keep maintaining the facility they have now and producing what they are producing now. There is no more new investment.”
Nigeria is the leading producer of oil in Africa, and relies on its oil for most of its revenues from exports and its national budget. In the past several years its average production has ranged between 1.9million barrels of oil per day and 2.3 million barrels per day. In 2015 It produced an average of nearly 2.28 million barrels per day, but President Buhari says he expects it to fall to no higher than 2.2 million barrels per day in 2016.
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