Despite the devastating effects of the COVID-19 pandemic on the global oil industry, the Federal Government sees a possibility of crude price rebound of at least $15/barrel in a short term, once the production curtailment deal being carried by the Organization of the Petroleum Exporting Countries (OPEC) and other nations is concluded.
Nigeria’s Minister of State, Petroleum Resources, Mr Timipre Sylva made the disclosure on Friday, as he joined the OPEC and other nations to reach a tentative agreement to temporarily cut crude oil production, in a strategic effort to rebalance and stabilize the global oil markets.
The Minister, in a statement, noted that the historic intervention, when concluded, will galvanize a $15/barrel rebound, thus 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.
He said: “The price rebound may translate to additional revenues of not less than $2.8 billion dollars for the federation.
“It is therefore pleasing to note that despite the production curtailments that this historic agreement will entail, 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 2022”, he noted.
Sylva said Nigeria was committed to developing the framework of the Declaration of Cooperation entered on 10th December 2016 that was further endorsed in subsequent meetings and the Charter of Cooperation signed in July 2019.
He said: “Nigeria joined OPEC+ to cut supply by up to 10 million barrels per day between May and June 2020, eight million barrels per day between July and December 2020 and six million barrels per day from January 2021 to April 2022, respectively.
“Based on reference production for Nigeria for 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 360-460 KBOPD of which are exempted from OPEC curtailment. The agreement awaits close out of ongoing engagement with Mexico to agree on its full participation”, he explained.
OPEC and the other non oil-producing countries agreed to cut 10 million barrels a day (about 23 percent) of their production levels in May and June, they said in a statement on Friday. Possible further trims could come from a meeting of the Group of 20 nations on Friday.
At the OPEC+ meeting, negotiations hit a snag late Thursday over Mexico’s reluctance to cut its share of oil, reportedly 400,000 barrels a day, leaving the deal in limbo. In the statement, the group said the deal was conditional on Mexico’s consent.
Even before that happened, oil prices fell because analysts and traders had hoped for a bigger reduction to prevent the buildup of a glut of oil. On Thursday afternoon, the West Texas Intermediate crude future contract, the American benchmark, was down more than 7 percent to $23.28 a barrel.