Adewale Sanyaolu
Implementation of the 2019 budget may face some difficulties in the days ahead after Nigeria finally agreed to an earlier agreement among Organisation of Petroleum Exporting Countries (OPEC) members to cut its oil production by 57,000 barrels.
The situation gets further compounded as international oil benchmark, Brent crude, declined on Tuesday, trading below at $58.80 below Nigeria’s $60 per barrel budget benchmark.
Brent, against which Nigerian crude oil is priced, dipped by $2.20 to settle at $58.80 per barrel as of 7.45pm Nigerian time.
Oil prices rebounded on reports that output from the world’s largest oil producers fell during the third quarter, although a resumption in Saudi supply and demand concerns kept a lid on gains.
The 2019 budget, which was signed by President Muhammadu Buhari in May, was based on oil production of 2.3 million bpd (including condensates) with an oil benchmark price of $60 per barrel.
With this development, Nigeria oil earnings is set to witness a further decline as the country is expected to lose about $3.351 million daily from the 57,000 bpd oil cut
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kolo Kyari, gave the commitment at a conference in Fujairah, United Arab Emirates.
Kyari said Nigeria will make cuts to its crude oil output to comply with OPEC output targets.
Nigeria’s September crude oil and condensate output was around 2.1-2.2 million barrels per day (bpd).
“We will (cut) across the assets. The OPEC quota (is) on crude production only, not on condensate, so it doesn’t affect the condensate,” he told reporters at a conference in Fujairah in the United Arab Emirates.
“Our non-conformity is clearly on the crude, and it’s not significant so when you spread it across all the assets it will not be a shock.”
Kyari added that Nigeria hoped to raise oil production to about three million bpd in the next 2 to 3 years.
The 14-nation of OPEC had agreed in December with non-OPEC partners including Russia to reduce supply by 1.2 million bpd from the start of this year.
OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members, with exemptions for Iran, Libya and Venezuela.
According to a Reuters survey published on Monday, Nigeria had pumped beyond its quota by 265,000 bpd in September, more than any other OPEC state.
Iraq, Congo, Ecuador and Gabon had also over-produced but by much smaller margins, the survey found.
Nigeria is also discussing potential investment opportunities with Saudi Aramco and ADNOC of the United Arab Emirates in Nigeria, and discussing potential gasoline supply with Aramco trading.