Crude oil production drops below budget’s target
Nigeria’s crude oil production has declined by 56,000 barrels per day (bpd) from the 1.694 barrels per day it recorded in March to 1.637 bpd in April, according to the latest report of the Organisation of Petroleum Exporting Countries (OPEC).
The country has however, suffered a shortfall of 563,000 bpd from the 2.2 million barrels per day crude oil output pegged by the Federal Government in the 2016 budget.
Nigeria’s crude oil production decline has helped boost prices to more than two per cent higher than it recorded since November 2015 on the back of more disruption to supplies from Nigeria.
The country’s crude oil output has been on the decline since last year, dropping from 1.8 mbpd it recorded in the better part of 2015 to 1.7mbpd in January this year before the latest development, which was spurred by pipeline vandals.
OPEC in the report released yesterday, predicted that oil prices would recover to $70 a barrel due to production disruption in Nigeria and other oil producing countries.
According the report, total OPEC crude oil production in April averaged 32.44 mbpd, over the previous month.
It noted that crude oil output increased mostly from Iran and Iraq, while production decreased in Kuwait and Nigeria.
Commenting on the renewed insurgency and pipeline vandalism in the Niger Delta, the ministry said it has drastically reduced national crude oil production to 1.65 million barrels per day against 2.2 million barrels per day planned in the 2016 budget. This, it said would further reduce income to Federation Account and also affect crude volumes for Premium Motor Spirit (PMS) conversion and negatively impact forex earnings.
“In the absence of available forex lines or crude volumes to continue massive importation of PMS, it is clear that unless immediate action is taken to liberalise the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control,” it stated.
Drawing a line between the January 2012 deregulation plan and that of the present government, the ministry stated that crude oil price was at $110 per barrel then and is at present valued at $40 per barrel hence it is lacking funds to cater for the subsidy regime owing to low crude prices.
Besides, it pointed out the non-availability of foreign exchange to import petroleum products, adding that marketers have drastically reduced their importation since third quarter of 2015 due to a scarcity of forex thus creating the need for them to source forex independent of Central Bank of Nigeria (CBN) to be able to meet the nation’s demand.
To explain the prevailing high prices in certain states, it said marketers who source forex independently of CBN in order to carry on participation in PMS supply will continue to sell at prices that enable them achieve full cost recovery.
Meanwhile, it stated that at an import bill of $600 million per month for PMS, which is CBN’s liquidity to support the importation of PMS, is challenged in the face of dwindling crude oil for exports.
It argued that as a result of the regulation of the downstream sector, the Federal Government has continued to incur N13.79 per litre under recovery in form of subsidy, while states fail in their fiscal responsibilities.
This, it said indicated that growing subsidy differential is a threat to state debt profile.