The times are not good for Nigeria as its crude oil production has fallen by almost 40 per cent to 1.4 million barrels per day due to militant attacks on facilities in the Niger Delta.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, stated this on Monday while addressing members of the House of Representatives, who summoned him to explain why the government increased the pump price of petrol.
His comments came amid a resurgence of militancy in the Niger Delta, which produces most of the crude oil that the country relies on for around 70 per cent of national income.
Kachikwu said efforts would be made to engage with people in the area.
Nigerian oil output has been driven lower after attacks by a group calling itself the Niger Delta Avengers, which said it wanted a greater share of oil profits and independence for the swampy region where residents have long complained of poverty, Reuters reported.
Attacks in the last few weeks have hit platforms belonging to Chevron and Shell.
“Because of the incessant attacks and disruption of production in the Niger Delta, as I talk to you now, we are now producing about 1.4 million barrels per day. We were at 2.2 million bpd, but we have lost 800,000 barrels,” Kachikwu said.
The 2016 budget assumes oil production of 2.2 million barrels per day at $38 per barrel.
Nigeria has moved in army reinforcements to hunt the militants but British Foreign Minister, Philip Hammond, said on Saturday that the government needed to deal with the root causes of the conflict, because a military confrontation could end in “disaster”.
Kachikwu echoed these sentiments when he told the lawmakers that experience had shown that force alone tends not to solve problems.
“There are going to be robust engagements on what could have happened to the contract or relationship that used to exist between the Niger Delta and the Nigerian Police that has suddenly resorted to sabotage,” the minister said.
President Muhammadu Buhari has extended a multi-million dollar amnesty signed with militants in 2009 but upset them by ending generous pipeline protection contracts.
“We are trying to look at the amnesty and what has happened. Policing is key, security is key and throwing economic palliative to those sectors are also key,” added Kachikwu.
He said the government was “trying to create funding mechanisms for some private investments, including funding mechanisms for some modular refineries” and “actually getting them involved in the security of the facilities.”
Meanwhile, the global oil benchmark, Brent crude, on Monday, traded around $49.08 per barrel, the highest level since November last year, buoyed by more disruption to supplies from Nigeria and after long-time bear Goldman Sachs expressed optimism about the market.
Supply disruptions in Nigeria and other countries have most likely pushed oil production below consumption levels in May for the first time in at least two years, meaning the world has started eating into the huge stockpiles of oil, which knocked as much as 70 per cent of crude prices between 2014 and early 2016.
The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs, which had long warned of global storage hitting capacity and of another oil price crash to as low as $20 per barrel.
“The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” Goldman said.
“The market likely shifted into deficit in May…driven by both sustained strong demand as well as sharply declining production,” the investment bank said.
However, Goldman cautioned that the market would flip back into a surplus in the first half of 2017 as it said prices of around $50 per barrel in the second half of 2016 would see exploration and production activity picking up again.
Crude futures have rallied for most of the past two weeks from a combination of non-OPEC supply outages, declining US production and virtually frozen inflows of Canadian crude after wildfires in Alberta’s oil sands region.
In the Americas, US officials warned they were increasingly concerned by the possibility of an economic and political meltdown in Venezuela amid low oil prices, where crude production has also been falling due to power shortages.
Punch
