Last Thursday’s Organization of Petroleum Exporting Countries (OPEC) resolution extending by another nine months its 2017 output cut agreement will not affect the Nigerian government’s revenue projections in the 2018 Budget, the Minister of State for Petroleum Resources, Ibe Kachikwu, has said.
Mr. Kachikwu, who stated this on Friday, said Nigeria was capable of meeting and exceeding the 2.3 million barrels per day crude oil production and oil revenue benchmarks in the proposed 2018 budget before the National Assembly for approval.
Although Nigeria was one of the “soft” targets exempted from the final resolution by members to undertake adjustment of about 1.2 million BPD for six months, Mr. Kachikwu, who led the country’s delegation to the Vienna meeting, said Nigeria was expected to produce about 1.8 million BPD.
The other soft target, Libya, is expected to account for another one million barrels daily, to enable them recover fully from the negative impact of disruptions in their operations from attacks by militants in their countries.
Analysts observed that the 1.8 million BPD production cap may trigger a review of the fundamentals in the 2018 Budget, as it fell short of the proposed oil output benchmark by about 27.8 per cent.
But Mr. Kachikwu said there was no cause for concern, as the country was on course to meet and exceed all its targets during the 2018 fiscal year.
“First, the 1.8 million barrels per day was not a cap fixed for Nigeria by OPEC, but an expectation,” he explained. He did not elaborate. Also, Nigeria’s oil output does not include condensate production of 350,000 barrels per day. So, between 1.8 million BPD and 350,000 BPD, we (Nigeria) are doing 2.2 million barrels per day. We can produce more than the 1.8 million BPD if we have the capacity.”
Nigeria is the only OPEC member producing a special blend of crude oil, “Sweet Crude”, with condensate, whose production is not covered by OPEC regulation and output computation.
The Group General Manager, Corporate Planning and Strategy, Bala Wunti, told the House of Representatives Joint Committee on 2018-2020 Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP that the country’s average daily oil production was currently about 1.885 million BPD.
“The 2018 national crude oil production projection for Joint Ventures, Modified Carry Arrangement, MCA, or External Financing, Production Sharing Contracts, PSCs, Independents, Marginal Fields and Service Contracts, SCs is about 2.298 million BPD,” Mr. Wunti said.
Apart from the country’s production capacity, Mr. Kachikwu said Nigeria was equally banking on the prospects of increased revenue as a result of anticipated improvement in global oil prices, to balance whatever funding gaps in the budgetary projections.
In the proposed N8.6 trillion ‘Budget of Consolidation’ presented by President Muhammadu Buhari to the National Assembly for approval, crude oil benchmark price was put at an average of N45 per barrel, based on low benchmark price of $35, medium ($45) and high ($55) scenarios.
Just as OPEC announced its latest resolution to extend the output cut agreement, crude oil price at the international market jumped from about $61.41 to above $62 per barrels, about $17, or about 37.8 per cent in excess of the proposed N45 price in the budget.
Mr. Kachikwu said with the current intervention by the OPEC to stabilise the global oil market, there were prospects that prices would stay above the budgeted benchmark, to enable Nigeria cover whatever revenue gaps in the budget.
To benefit maximally from the current production exemption and to encourage and improve upstream investment, the Minster said the country would continue to push joint venture upstream operating companies to reduce production cost per barrel.