As four of the nation’s crude oil grades remain under force majeure and the schedule for two other grades face delay, the country is losing at least N10.7bn in revenue daily.
Following the declaration of force majeures on the grades, more than 700,000 barrels per day of production have been affected, denying the country a huge revenue, according to a report by Reuters on Thursday.
Nigeria relies heavily on earning from oil exports, and the recent production disruptions caused by militant attacks came as an additional headache for an economy that already suffers from the sharp drop in oil prices since 2014.
The nation’s crude oil production has fallen from an average of 2.2 million bpd to as low as 1.3 million barrels per day, the Federal Government has said.
According to the government, the plunge is primarily due to the destruction of oil and gas installations in the Niger Delta region, and it has decreased the country’s revenue by over 60 per cent.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, disclosed this on Thursday at the headquarters of the Nigerian National Petroleum Corporation in Abuja while explaining how the crash in crude oil prices and the militancy by agitators in the Niger Delta region had adversely affected the nation’s economy.
He said, “We are presently passing through very grave circumstances in Nigeria. Oil that was at a price of about $120 is at about $42 per barrel today. The price has continued to struggle and based on this element alone, the Federal Government has lost over 50 per cent of its income and so do the states.
“As if that wasn’t bad enough, the militancy itself has brought down production from an average of 2.2 million barrels to about 1.4 million barrels today. And if I discount what I’m seeing here today, it probably is about 1.3 million barrels. So, what this means is that when you take the cumulative effect of both pricing and militancy, we are down to more than 60 per cent drop in the income of this country.”
Kachikwu’s statements came as the Group Managing Director, NNPC, Dr. Maikanti Baru, urged the National Association of Petroleum Explorationists to explore the hydrocarbon potential of green frontier basins in order to increase the nation’s reserves, which were fast depleting.
Baru gave this charge when he received the leadership of NAPE led by its National President, Mr. Nosa Omorodion, at the NNPC Towers.
The NNPC GMD described the association as a very important part of the oil and gas industry in promoting policy formulations that had led to the growth of exploration of hydrocarbon resources in Nigeria.
He urged NAPE to play a key role in promoting public private partnership in the exploration of some of the green frontier basins, noting that the Federal Government would be willing to provide the needed incentives for such prospective investors.
Earlier, the National President of NAPE had said the primary objective of the association was to promote excellent ideas in the exploration of hydrocarbon, which had contributed to the passage of landmark legislations such as the Local Content Act.
Omorodion felicitated with the GMD on his appointment, saying that NAPE would confer on him a honourary membership award, which is the highest award from the association, due to his track record in the Nigerian oil and gas industry.
The Energy International Administration, the statistical arm of the United States’ Energy Department, recently said Nigeria’s crude oil production would remain depressed through 2017 as a result of militant attacks.
The EIA said the crude oil production disruptions in Nigeria reached 750,000 bpd in May 2016, the highest level since January 2009.
Since the beginning of 2016, the Niger Delta Avengers have intermittently attacked the oil and natural gas infrastructure concentrated in the Niger Delta region.
For more than three months, three of the grades, Forcados, Qua Iboe and Brass River, have been under force majeure — a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
Shell Petroleum Development Company of Nigeria Limited declared force majeure on exports of Bonny Light on August 12, just over a month after it lifted the force majeure it declared on the grade on May 10.
The oil major declared force majeure on liftings from the Forcados export terminal on February 21, following the disruption in production caused by the spill on its subsea crude export pipeline.
It remained unclear whether ExxonMobil would be able to use a smaller alternate pipeline to resume some Qua Iboe exports. No programme has emerged for the grade. Schedules for Erha and Bonga were also delayed, according to Reuters.
Sources were quoted to have said line tests had begun about two weeks ago. Repairs to the main subsea line are expected to take at least another month to complete.
Meanwhile, the country lost a total sum of $30bn in oil revenue between 2014 and 2015 as a result of the drop in crude oil prices, the Executive Director/Chief Executive Officer, the Nigerian Export Promotion Council, Mr. Segun Awolowo, has said.
He gave the figure on Thursday in Abuja while speaking at the graduation ceremony of the third batch of the NEPC zero-to-export capacity-building programme.
The NEPC boss said while the country earned about $70bn in crude oil in 2014, the amount earned dropped by $30bn in 2015 to $40bn.
He said as a result of the volatile nature of the oil market, the country could no longer depend on such commodity, hence, the need to groom a new crop of non-oil exporters that would assist in diversifying the economy.
He said, “The Federal Government fiscal strategy framework for the next three years is based on non-oil. So, you could not have chosen a better time to equip yourselves with the skills to effectively participate in non-oil export sector.
“Recent developments on global commodities market have triggered a wake-up call on the need for us to accelerate the diversification of our economy, moving away from an over-dependence on oil as our main source of revenue.
“Since peaking in June 2014, the price of crude oil has fallen roughly by 60 per cent. Nigeria lost $30b in oil revenue between 2014 and 2015.”
Awolowo said in a bid to encourage the new set of exporters, NEPC, in collaboration with Providus Bank Plc, had secured a N100m financing facility for the graduands.
The Executive Director, Providus Bank Plc, Mr. Kingsley Aigbokhaevbo, said the bank would continue to support the diversification strategy of the Federal Government.
He said the N100m facility would be made available to the new exporters, adding that this would enable them to achieve their objective of making their first exports in October this year.
The zero-to-export initiative is one on the programmes of NEPC that focuses on creating new generation of Nigerian exporters through practical and theoretical training of business executives, bankers, civil servants ad unemployed graduates among others in the export business.
So far, the programme has trained and graduated over 100 participants from Lagos and Abuja.