Nigeria says it expects to gain about $2.8 billion from its sale of crude oil in the coming months if the weakened prices of the commodity gain an additional $15 per barrel after member-countries of the Organisation of Petroleum Exporting Countries (OPEC) and its allies agreed on fresh production cut to stabilise the oil market.
OPEC and its allies, led by the Russian Federation, agreed in a meeting on Thursday to cut output by 10 million barrels a day between May and June 2020, 8mbd between July and December 2020 and 6mbd from January 2021 to April 2022, respectively.
In line with the agreement, Minister of State for Petroleum Resource, Timipre Sylva, who spoke on the expected $2.8 billion gain, said in a statement yesterday that the country agreed to limit its daily oil production to 1.412mbd, 1.495mbd and 1.579mbd within the period in compliance with the measures to rebalance and stabilise the oil market.
Sylva stated that the decision by OPEC and its partners was historic, but added that OPEC’s curtailment measures would not include Nigeria’s condensate production which is between 360,000 and 460,000 barrels a day.
He said: “It is expected that this historic intervention, when concluded, will see crude oil prices rebound by at least $15 per barrel in the short term, thereby 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. The price rebound may translate to additional revenues of not less than $2.8 billion dollars for the federation.”
The minister equally claimed that despite the production curtailments, it was pleasing for him that, “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 2020.”
Nigeria’s 2020 budget, which is expected to bear the brunt of the oil price slash, was passed in December 2019 with assumed oil production mark of 2.18mbd and $57 per barrel. Sylva, however, disclosed that these assumptions have been reviewed downwards with the expectation that the new OPEC measures will be beneficial to the country.
“Nigeria is participating in the pursuit of our commitment to the framework of the Declaration of Cooperation entered on 10th December 2016 and further endorsed in subsequent meetings, as well as the Charter of Cooperation signed in July 2019,” Sylva said.
According to him: “Nigeria joined OPEC to cut supply by up to 10 million barrels per day. Based on reference production of Nigeria of 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 and 460 KBOPD of which are exempt from OPEC curtailment. The agreement awaits close outcome of ongoing engagement with Mexico to agree on its full participation.”
U.S., G20 to Support Plans for Largest Oil Supply Deal
The United States and the G20 are prepared to support plans for largest oil supply deal in history, putting weight behind OPEC and Russia production cuts and offering additional contributions to stabilise an industry devastated by the coronavirus.
Demand for oil has dropped by about a third, with some of the world’s largest economies effectively shutting down in an attempt to stop the spread of the virus, pushing crude prices to their lowest level in 18 years and threatening millions of jobs in the energy sector and long-term damage to supplies.
The expected deal will mark a diplomatic victory for US President Donald Trump, who pressured Saudi Arabia, the most powerful member of OPEC, and Russia to end an old price war by a month that had exacerbated the crisis in the energy markets.
He held talks with Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin on Thursday and yesterday, threatening tariffs on their oil sales if they fail to reach an agreement.
North American production is already down due to the collapse in oil prices, but the United States and Canada have stopped committing to additional government-imposed supply restrictions, pointing instead to large-scale reductions in capital spending by private energy companies.
Despite the support of the G20, doubts remain that the measures taken will be sufficient. Excess supply still threatens to maximize storage facilities globally in a matter of months, even though the supply shortages have taken time.