...Nigeria’s oil output rises to 2.3mbd
By Michael Eboh
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, Monday, hinted of a possible deregulation of the Nigerian downstream petroleum sector, stating that the Federal Government has eliminated subsidy and under recovery in the industry.
Speaking in an interview monitored on a television programme in Abuja, Kyari said, “There is no subsidy and it is zero forever.
Going forward there would be no resort to either subsidy or under recovery of any nature. NNPC will play in the marketplace, it will just be another marketer in the space.
But we will be there for the country to sustain security of supply at market price.”
Kyari further disclosed that Nigeria’s crude oil and condensates output has risen to 2.3 million barrels per day.
He stated that the output growth, which was achieved on Sunday, was the first time the country was hitting that milestone in very many months and years.
He noted that despite the glut in crude oil supply across the world due to the Novel Coronavirus (COVID-19) pandemic, the country was still getting buyers for its crude oil, while he added that the number of stranded vessels carrying Nigeria’s crude oil had dropped to less than 20.
He said, “There is no challenge with that. The buyers have choice now. Choice of quality and choice that is associated with distance. These two factors will determine which crude oil consumers buy. Our major source of trade is Europe, followed by Asia, particularly India.
“And in times like this when crude oil prices go down, what buyers do is to buy the cheap crude available and take them into storage. So the way to gauge this is when your buyers do not return the crude after six days of purchase. For by contract, after allocation of a cargo, the buyer is supposed to come back to you within six days and say I cannot take this. There is a legitimate right to do that.
“But none of our partners have come to tell us that they cannot take our crude and it is way pass the six days. This means that they have found value for this crude. Value here does not necessarily mean taking it into the refineries, it can mean taking it into storage or even floating it in the vessels. That is why people are now using these vessels as storage facility because they know that a change in price will come very shortly.
“When we say that our crude is stranded, it means that at a point in time when traders are not able to tell you where they are taking it to. It does not mean they did not buy it. It means that you have to watch, although there is concern because they have not come back to take the next cargo.
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“When we reported stranded cargo it means that our partners are unable to find a way around it as at the point in time we reported. But I am happy to announce that that number has gone down substantially, I don’t have the exact numbers for today, but it is now less than 20.”
Kyari further projected that crude oil prices would end the year at an average of $30 per barrel going by global economic trend.
He said, “The change in price as at this morning means that people are recovering from the impact of COVID-19 and it means that countries will go back to work and consumption will gradually recover. But if the pandemic does not reduce to a point where you have at least 75 per cent of people coming back to work, then you will have a challenge. But once about 80 per cent of the world population return to work, then our crude will be sold and there are no concerns.
“In every country, like in our own country, we have some facilities that produce at more than $30 per barrel and there are also those that produce at below $20, say $15, $16, $17 per barrel. So at times like this you focus on assets that produce at low costs.
“Also at time you see people trying to see if they sell below their production cost and see how they can sustain it for the few months that the challenge will last and work towards closing the gap. We are looking at all options.”
Kyari further stated that Nigeria was endowed with premium crude oil grades which is supplied to Europe, Asia and India, stressing that despite the COVID-19 pandemic which has affected demand and supply fundamentals, all of Nigeria’s export terminals were still in operations.
He said, “The key issue in crude oil business is market fundamentals of demand/supply. I believe COVID-19 will subside and countries will come back to life. I don’t see oil price going below the $20 we saw last week. I’m certain, all things being equal, oil price will bounce back.”
The NNPC’s helmsman assured Nigerians of ample supply and distribution of petroleum products, stating that despite the Coronavirus pandemic, the corporation had in stock about 2.6 billion litres of petroleum products that could service the country’s energy needs for the next two months.
Furthermore, Kyari noted that as part of its contribution to build a robust healthcare for Nigeria, the Nigerian oil and gas industry is set to embark on the construction of, at least, two hospitals and a world class diagnostics center in each of the geopolitical zones in the country, in addition to the 250 temporary bed facilities that it offers to support government’s efforts in the fight against the Cronavirus pandemic.
He explained that the hospitals and the world class diagnostics centers would be an addition to the regular Corporate Social Responsibility (CSR) initiatives of the upstream and downstream companies, as well as service providers operating in the oil and gas industry.