• Sunday, July 14, 2024
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Why Nigeria is not benefiting from expected 500,000 barrels coming to market in January 2021

OPEC+ output decision stalemate impairs coordination

Nigeria will continue to pay for late compliance of OPEC production cut on till March 2021. This would be when she is expected to have completed her own production cut and properly return to post Covid 19 period of about 1.8 million barrels per day.

This means that she will not be one of the beneficiaries of the 500,000barrels of crude oil that OPEC and non-OPEC members would bring to the markets in January 2021.

The compensation period for overproduction by Declaration of Cooperation (DoC) participating countries was extended until the end of March 2021 to ensure full compensation.

According to Mohammadu Barkindo, the OPEC secretary-general gave this hint while speaking at Nigeria Oil and Gas.

He, however, said the oil market responded immediately in a positive manner, by moving the price of crude oil to $50 a barrel, with the statements by the DOC that it would allow about 500,000 barrels to the market by January 2021. This market reaction, he said, means that the actions reinforce the conviction that the Declaration of Cooperation (DoC) is focused on maintaining its steady and stable course through 2021.

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But the Nigerian National Petroleum Corporation (NNPC) appears to be positioning itself to increase its production capacity immediately after the sanction is lifted.

This is because Mele Kyari, the group managing director of the NNPC said the corporation is preparing to hit the three million barrels per day production mark.

He said the Federal Government is considering new oilfield licensing rounds next year, especially in the deep and ultra-deep waters of the Niger Delta.

Mele Kyari who spoke during an online interaction anchored by the Society of Petroleum Engineers (SPE) International, said the plan was delayed by the COVID-19 pandemic.

According to him, with the current price rebound, some licensing could be in the offing by 2021.

He reiterated the ambition of the national oil company to soon ramp up production to about three million bpd, especially when the current cuts imposed by the Organisation of Petroleum Exporting Countries (OPEC) are lifted.

Kyari added that some assets had already been lined up to boost oil production.

This year, the country launched its first marginal oilfield licensing round in about 20 years, fields it said were likely to be developed by local companies and were less dependent on limited international funding for their operations.

He noted that in the corporation’s pursuit of increasing crude oil reserves to 40 billion barrels, it is looking beyond the Niger Delta to the frontier basins, where the NNPC recently said it had discovered oil in commercial quantities.

“This company will break even, hopefully by the end of this year, and become a net deliverer of value to our country and beyond that, we are improving our systems and processes, reshaping our portfolios and shifting our priorities to things that work and things of value.

“For us, the ambition is to take the company to the next level and to do that, we need to go international and to do that, you must be competitive and ahead of your game so that this company will be the pride of this country. We need to deliver excellence, transparency and accountability,” Kyari said.

He explained that not much exploration activities are going on in the Niger Delta currently because the pandemic had slowed down activities.

“Our ambition is to grow to 40 billion barrels of proven reserves and increase gas assets. To do this, you have to go to the frontier areas and there are a number of them. Currently, we have found one in Benue trough with substantial quantity.

“This has also led us to understand the area and see the vast potential elsewhere in the frontier basin. And we are doing some exploration work and seismic data work in those areas.”

“There are still potential in the ultra-deep Niger Delta, which has very little exploration,” adding: “I know that by 2021, we will go into some form of licensing activities so that we can reopen the ultra-deep and some parts of the deepwater and also look at the opportunities on some of the onshore assets that have not been explored.”

According to him, with the growing confidence of investors and Nigerians in the NNPC, given its renewed avowal to transparency, it will be a matter of time, before the company will fully stand shoulder to shoulder with its likes in other oil-producing nations.

“So, there are huge opportunities in 2021 to 2022 with all its shortcomings, which are very obvious. We have seen a rebound in commodity prices and also some form of relaxation on the OPEC platform so that people will have the confidence to go back to more exploration,” he stated.