By Hamilton Nwosa(Head, The New Diplomat’s Business and data tracking desk)
As Nigeria, Africa’s Oil giant, grapples with the global impact of the terrifying Oil price crisis, she is currently weighing various options in a bid to manage the situation as well as abide by the agreement reached by OPEC and non-OPEC member countries to cut production by a total of 9.7million barrel per day. Nigeria has to meet up with the OPEC+ deadline this Friday, May 1, 2020.
Multiple sources confided in The New Diplomat last night that Nigeria as a member of OPEC and party to the deal struck by United States President Donald Trump, Russia President Vladimir Putin, King of Saudi Arabia, King Salman and 19 others countries, had agreed to the historic deal to slash production by 9.7million barrels per day. This was in a dramatic move to end Saudi-Russia tension on the one hand, and to resolve Mexico-Saudi stand-off on the other hand in a bid to address the unsettling oil price crisis.
Under that agreement, the 22 oil producing nations that struck the deal reportedly committed to withholding 9.7million barrels a day collectively from the global oil market. The deal which was sealed on Sunday April 12, to end the crippling effects of escalating oil glut came through after United States President Trump stepped in to resolve open and tense differences between Saudi Arabia and Mexico which initially threw spanners in the works, is to come into effect on May 1, 2020.
Though experts say the cut falls far short of market requirements to bring oil production in line with global demand, Nigeria is still yet to figure out how, and what specific dynamics to apply in cutting down production as part of the OPEC+ deal. Diplomatic sources at OPEC headquarters in Vienna, Austria told The New Diplomat on phone that the delay on the part of Nigeria to quickly figure out the right metrics for production cut may have resulted in her delay in the May and June crude oil export planning dynamics of the Nigeria National Petroleum Corporation (NNPC), Nigeria’s national Oil company.
It would be recalled that the deal by OPEC+ to cut production by 9.7million bpd at the global oil market is billed to come into operation this Friday. According to energy experts, the is expected to stabilize oil prices, and help restore some stability to the global financial system. Recall that Oil prices witnessed massive collapse following the crippling effects of Covid-19 as well as the now resolved protracted face-off between Russia and Saudi Arabia which resulted in oil price war and operational glut
Nigeria is projected to produce 1.412 million bpd in May-June 2020, 1.495 million bpd in July-December 2020, and 1.579 million bpd between January 2021 and April 2022, as part of the overall OPEC+ deal, going by an official statement issued by the Ministry of Petroleum Resources after acting as a party to the Trump, Putin, and King Salman’s led OPEC+ deal on April 12. “This is in addition to condensate production of 360,000 bpd to 460,000 bpd from which Nigeria is exempt from the cuts,” the statement had added.
According to OPEC data sourced by The New Diplomat, official figures pumped by the Federal government through the NNPC for March 2020, stood at 1.853 million bpd of crude oil, which was up by 65,000 bpd compared to figures pumped in February, the previous month.
However, given the pretty tricky dynamics in Nigeria’s Oil industry whereby the NNPC leads operations in many of the nation’s oilfields in collaboration with joint ventures partners especially international oil majors, such as Exxon, Chevron, Shell, and Eni, it is still hazy how NNPC intends to effect the agreed OPEC+ production cut. Both energy and diplomatic sources hinted that the Federal government is currently discussing with Oil majors on production cuts. OPEC sources said this development may have accounted for why there has been a delay in Nigeria’s “crude oil loading modalities for June as well as the official selling prices (OSPs) for May.”
However, experts aver that under the present circumstances, the Federal government has no viable option other than to cut production. In fact, Mele Kyari, NNPC GMD said this much last week in an interview with a Nigerian digital newspaper:’“We have to cut down, whether with or without OPEC output cut deal. We have to reduce our oil production level because we do not have where to take the oil to, till the situation improves. The impact of the crisis is global and not on Nigeria alone,”
Recall that Nigeria’s Nigeria’s Bonny Light crude had gone down as very low as $12pb, and even with encouraging discounts of about $5 a barrel, there are no buyers yet as at the time of filing this report. A top official at the NNPC told The New Diplomat last night that “there are currently April and May Nigerian cargoes with oil in the Sea that have not been sold yet, with no off takers yet. The result is that even at $12 per barrel, there are no off takers yet….”
