•Expects $15 per barrel price rebound, cuts output to 1.4mbd
By Chineme Okafor and Emmanuel Addeh in Abuja
Nigeria says it expects to gain about
$2.8 billion from its sale of crude oil in the coming months if the
weakened prices of the commodity gain an additional $15 per barrel after
member-countries of the Organisation of Petroleum Exporting Countries
(OPEC) and its allies agreed on fresh production cut to stabilise the
oil market.
OPEC and its allies, led by the Russian
Federation, agreed in a meeting on Thursday to cut output by 10 million
barrels a day between May and June 2020, 8mbd between July and December
2020 and 6mbd from January 2021 to April 2022, respectively.
In line with the agreement, Minister of
State for Petroleum Resource, Timipre Sylva, who spoke on the expected
$2.8 billion gain, said in a statement yesterday that the country agreed
to limit its daily oil production to 1.412mbd, 1.495mbd and 1.579mbd
within the period in compliance with the measures to rebalance and
stabilise the oil market.
Sylva stated that the decision by Organisation of Petroleum Exporting Countries
(OPEC)
and its partners was historic, but added that OPEC’s curtailment
measures would not include Nigeria’s condensate production which is
between 360,000 and 460,000 barrels a day.
He said: “It is expected that this
historic intervention, when concluded, will see crude oil prices rebound
by at least $15 per barrel in the short term, thereby enhancing the
prospect of exceeding Nigeria’s adjusted budget estimate that is
currently rebased at $30 per barrel and crude oil production of 1.7
million barrels per day. The price rebound may translate to additional
revenues of not less than $2.8 billion dollars for the federation.”
The minister equally claimed that
despite the production curtailments, it was pleasing for him that, “all
planned industry development projects will progress, as they will be
delivered after the termination of the 9th OPEC/Non-OPEC Ministerial
Meeting Agreement on adjustments in April 2020.”
Nigeria’s 2020 budget, which is expected
to bear the brunt of the oil price slash, was passed in December 2019
with assumed oil production mark of 2.18mbd and $57 per barrel. Sylva,
however, disclosed that these assumptions have been reviewed downwards
with the expectation that the new OPEC measures will be beneficial to
the country.
“Nigeria is participating in the pursuit
of our commitment to the framework of the Declaration of Cooperation
entered on 10th December 2016 and further endorsed in subsequent
meetings, as well as the Charter of Cooperation signed in July 2019,”
Sylva said.
According to him: “Nigeria joined OPEC
to cut supply by up to 10 million barrels per day. Based on reference
production of Nigeria of October 2018 of 1.829 million barrels per day
of dry crude oil, Nigeria will now be producing 1.412 million barrels
per day, 1.495 million barrels per day and 1.579 million barrels per day
respectively for the corresponding periods in the agreement.
“This is in addition to condensate
production of between 360 and 460 KBOPD of which are exempt from OPEC
curtailment. The agreement awaits close outcome of ongoing engagement
with Mexico to agree on its full participation.”
U.S., G20 to Support Plans for Largest Oil Supply Deal
The United States and the G20 are
prepared to support plans for largest oil supply deal in history,
putting weight behind OPEC and Russia production cuts and offering
additional contributions to stabilise an industry devastated by the COVID-19.
Demand for oil has dropped by about a
third, with some of the world’s largest economies effectively shutting
down in an attempt to stop the spread of the virus, pushing crude prices
to their lowest level in 18 years and threatening millions of jobs in
the energy sector and long-term damage to supplies.
The expected deal will mark a diplomatic
victory for US President Donald Trump, who pressured Saudi Arabia, the
most powerful member of OPEC, and Russia to end an old price war by a
month that had exacerbated the crisis in the energy markets.
He held talks with Saudi Crown Prince
Mohammed bin Salman and Russian President Vladimir Putin on Thursday and
yesterday, threatening tariffs on their oil sales if they fail to reach
an agreement.
North American production is already
down due to the collapse in oil prices, but the United States and Canada
have stopped committing to additional government-imposed supply
restrictions, pointing instead to large-scale reductions in capital
spending by private energy companies.
Despite the support of the G20, doubts
remain that the measures taken will be sufficient. Excess supply still
threatens to maximize storage facilities globally in a matter of months,
even though the supply shortages have taken time.
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