Stories by Adewale Sanyaolu
Except the Federal Government and the private sector works extrahard in the new year, Nigeria may run into a major crisis funding the 2017 budget. More worrisome is the fact that oil is to fund about 27 per cent of the N7.3 trillion 2017 budget.
Stakeholders have, however, expressed concern that unless government puts in place a holistic approach to end the agitations in the Niger Delta, resulting to endless bombings of critical oil and gas infrastructure, the dream to achieve 2.2 million barrels per day (bpd) premises for a $42.5 per barrel its encapsulated in the 2017 budget may never to be realised.
President Muhammadu Buhari had, while presenting the 2017 budget of N7.298 trillion to the National Assembly last December, said the budget proposal was based on a benchmark of $42.5 per barrel and an oil production estimate of 2.2 million bpd with an average exchange rate of N305 to the US dollar will be funded more by non-oil revenues.
The aggregate revenue available to fund the federal budget is N4.94 trillion, which is 28 per cent higher than that of 2016, he said.
‘‘We will now use oil revenues to revive our agriculture and industries. Though we cannot control the price of crude oil, we are determined to get our production back to at least 2.2 million bpd. Consistent with the views which have also been expressed by the National Assembly, we will continue our engagement with the communities in the Niger Delta to ensure that there is minimum disruption to oil production.
“The National Assembly, state and local governments, traditional rulers, civil society organisations and oil companies must also do their part in this engagement. We must all come together to ensure peace reigns in the Niger Delta. In addition, we will continue our ongoing reforms to enhance the efficiency of the management of our oil and gas resources,” Buhari said during the budget presentation.
Niger Delta as barrier to 2017 budget success
The recent outburst of the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Maikanti Baru, that the spate of attacks on NPDC oil and gas infrastructure in 2016, cost the country a whopping N1.5 trillion was indeed worrisome.
The staggering amount is a source of concern to stakeholders, who warned that such level of attacks should not be allowed to continue in 2017 if the country is to achieve its aspiration of achieving a pass mark in its 2017 budget implementation.
And to ensure that similar fate does not befall the country in the New Year, Buhari has assured that the Federal Government will persuade Niger Delta militants to dialogue rather than fight for the control of oil resources in the region, adding that the government would persuade the agitators to dialogue and agree on measures to manage them.
Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, had during the National Association of Energy Correspondents Conference (NAEC) in Lagos lamented that militancy in the Niger Delta has destabilised the country’s oil industry and that Nigeria needs to up its production by 1.1 million bpd to meet target.
Kachikwu said the attacks have led to 60 per cent decline of gas production, revealing that between 2010 and 2015, the industry recorded 3,000 incidents.
According to him, 643 million litres of petroleum products amounting to N51.28 billion was lost in 2015, between January and June 2016, 1,600 incidents recorded resulting in a loss of 109 million litres of petroleum products and 560,000 barrels of crude oil to refineries.
Furthermore, he said about 850 million standard cubic feet of gas production had been shut in due to impact of the crises.
Role of NNPC in ensuring production stability
To put an end to the menace, the Nigerian National Petroleum Corporation (NNPC) has vowed to continue to find sustainable solution to the challenge posed by insurgency in the Niger Delta by intensifying stakeholders’ engagement to sustain peace.
The corporation said it had created security management platforms that would enable it identify and evaluate risks, develop and superintend implementation of investigations, and aggregate and deploy necessary resources to guarantee peaceful business environment in the region.
Baru stated this in an end of year message to staff of the corporation in Abuja, stressing that NNPC was committed to implementing a robust security and stakeholders’ strategy that would ensure that peace reigns in the industry’s operational areas.
Baru attributed the recent increase in the country’s oil and gas reserves to 37 billion barrels and 192Tcf respectively to the relative peace that was instituted in the Niger Delta.
As recently admitted by Buhari during his 2017 budget presentation to the National Assembly that Nigeria does not have control over oil prices, the Organisation of Petroleum Exporting Countries (OPEC) is doing all it can to ensure that it props up oil prices.
Rising from its 171st meeting held at OPEC headquarters in Vienna on November 30, 2016, OPEC reached a landmark deal that will effectively cut production by about 1.2 million bpd or about 4.5 per cent of current production to 32.5 million bpd. The agreement follows an earlier meeting held in September in Algeria where each member country reached a consensus on the need to cut production.
This was the first time since 2008, that OPEC would be accomplishing such a feat, which is expected to tackle the key challenge of low price of oil in the international market, which has affected the global economy with most OPEC member countries, including Nigeria, feeling the impact.
Member countries at the meeting agreed on the deal where considerations of the cartel offered to Iran, Libya and Nigeria would mean that in 2017, total production might likely increase even as other members seek to cut output in the first quarter of next year.
In the agreement where the countries are exempt from the production, Nigeria was accommodated due to some of the oil and gas facilities damaged by militant attacks in recent months.
Trump Presidency/Nigeria’s oil, gas industry
The United States (US) imports of Nigerian crude increased to 303,000 bpd by mid-November, according to OPEC’s December monthly report. This is a significant improvement from the 234,000, 241,000 and 218,000 barrels of oil from Nigeria in April, May and June respectively.
Today however, the country’s crude oil import from Nigeria had declined from the 10.125 million barrels it recorded in April to 4.755 million barrels in May. This is because the US has also begun exporting crude oil to other countries since the removal of restrictions.
On the other hand, the number of countries receiving exported US crude oil had risen since its removal in December 2015. Recent statistics from the NNPC revealed that India with 7.7 million barrels (mb); Spain, 4.5mb; Netherland, 5.1mb, were the biggest importers of the country’s crude oil in May this year.
However, after Trump’s victory, there is anxiety on how his administration is going to manage the relationship between Nigeria and the US in respect of crude oil export. Already, experts are of the opinion that Donald Trump’s hostility toward trade with OPEC and interest in the US energy security should be a source of worry to Nigeria, which is a member of OPEC.
In his America First Energy Plan, Trump said the US should “become, and stay, totally independent of any need to import energy from the OPEC cartel or any nation hostile to our interests.”
Although Trump has not publicly declared war against OPEC since becoming President-elect of the US, his campaign promises indicate he would likely adopt policies in favour of increasing fossil fuel (oil, gas and coal) output, which may reduce import from Nigeria.
Trump’s proposals or what he calls “energy revolution”, including open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing and open shale energy deposits.
Nigeria’s petroleum sector needs urgent reforms –NSE boss
President of the Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, has advocated that the country effect a drastic reform of its petroleum sector to ensure that the greater chunk of the business in the sector is handled by the private sector.
The NSE boss spoke while delivering a lecture, “A New Role for the Petroleum Industry in the Nigerian Economy” at the annual end of the year guarantors’ dinner organised by the Petroleum Club in Lagos recently.
Aig-Imoukhuede charged members of the Petroleum Club to work with the government in ensuring a more private sector-led petroleum sector where majority of Nigerians would be proud to own equity in various businesses in the sector.
According to him, the government ownership and control of majority equity in the Nigerian National Petroleum Corporation (NNPC) as well as in other oil and gas businesses aside promoting and sustaining a culture of graft, was not helping in ongoing efforts geared at unlocking the full potential of the industry for national growth and prosperity. A deregulated petroleum industry akin to what is happening in the banking sector is what the country needs, he said.
Aig-Imoukhuede described the continuous running of the NNPC by the Federal Government as “a distraction”, noting that it also encourages rent-seeking and intense pursuit of opportunities by Nigerians with no value added in terms of technological inventions to the industry.
He decried the loss of over N2 trillion to a fuel subsidy scam in the industry, saying it was the structure of the industry that allowed a few to enrich themselves through arbitrary or fraudulent means.
“In 2011, Nigeria paid over N2 trillion in fuel subsidy. Subsequently, it was established, and I know this and saw it, that over N1 trillion of these payments were based on fraudulent claims,” he said.
He advocated the reform of the sector to make it a platform for creating wealth for thousands and millions of Nigerians instead of the present system where few operators are milking the system.