Kachikwu says Nigeria’s exemption from further crude cuts inevitable
The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, on Wednesday said Nigeria would get more crude-cut exemption from the Organisation of Petroleum Exporting Countries (OPEC).
Nigeria has been exempted twice, the first time for six months and the second time for nine months, from the OPEC decision to cut crude production to shore up prices of the product.
Kachikwu, who made this known at a media interaction in Abuja, said that at the expiration of Nigeria’s crude-cut exemption in March, 2018, further exemption was inevitable.
He said that it was magnanimous of his OPEC colleagues to have understood that the government came in with difficulties and voluntarily gave the exemption but that market stability was an issue.
“So, the question is when do we join but I will recognise stability if I can consistently say that for at least six months, I’ve seen average daily productions that are within the umbrella of 1.8 million barrels.
”The market is still topsy-turvy; today I think we are around 1.6 million barrels per day (bpd).
“A lot of days we are slightly above 1.8 million barrels because of the understanding with our Niger Delta brothers.
”OPEC has no intention of giving an extension taking it back, but it shouldn’t take the butchering of my pipelines to get an exemption.
”I have obviously a mark of March, next year; if I need to draw it up to that point, I will.
“If my numbers are not showing stability (but if we are fine before then) and stability arises (but this is already September so March is really six months).
“It’s very unlikely that I can see stability that convinces me with certainty and predictability that I should exit the exemption between now and March,” he said.
The minister said that he wouldn’t do anything to jeopardise OPEC’s rules.
”We are going to be very transparent on this; I was the ex-OPEC President, we have the OPEC Secretary-General from Nigeria.
“So, my intent definitely cannot be to play games with this but at the same time we have to be very realistic.
”We are committed to the OPEC position; we are committed to the cut principles. We’ll do our best to align as soon as our colleagues begin to feel that we are stable enough.
”I, however, found working with Russia, working with Saudi Arabia and all the other OPEC members that they usually will be very honest in terms of looking at the data.
”They have their own secondary sources to determine what it is that we produce and they are able to see what the numbers are,” he said.
He said the nation was undergoing massive problems in terms of liquidity, income, predictability and financing of projects.
”This period enables us to get our act together and make sure all the things we need to do in the Niger Delta are done.
”People have a much firmer promise to remain stable, not attack our pipelines and we can predict our volumes day-to-day much more determinedly.
”We are seeing incidences of that begin to return but we still have these flip-flops,” Kachikwu said.
He reiterated that Nigeria was given the 1.8 million bpd maximum production, adding that technically, it would not change.
”We won’t be cutting from the 1.8 million but bear in mind that our production is 2.2 million barrels even though we’ve now moved condensates out of it.
“So, the exemption was that we’ll not exceed 1.8 million so anything above 1.8 million we’ll cut, not including condensates.
”When we finish repairing our infrastructure, our capacity is going to be huge.
”I think this country has potential capability to raise production to 2.5 million barrels so there will be quite some sacrifices that we will have to make to align ourselves with everybody.
“But capacity is one thing and ability to build on this capacity is another thing, so it’s still work in progress.”
On pipelines that were damaged, Kachikwu said it would take a while to restore them.
”Some damaged facilities have been repaired, some gone through an aging process and therefore going through natural altrusions as a result of so much impact of the militancy attacks.
”So, it’s not so much now day-to-day attack but the solvability of the infrastructure that was damaged during those periods.
”It requires money, we don’t have straight money to put that in place so you see all those effects that go into determining stability in the oil industry,” he said.
The minister said the industry should be concerned with reducing costs of production because competition like Shale oil could now be reached with new technology thereby reducing cost of production and providing more reserve.
”How far will that go? Your guess is as good as mine. If that continues, then your ability to flush out the liquidity that is creating this surplus age will be challenged.”
He commended Saudi Arabia, saying he had learnt a lot from the country’s willingness to have a conversation in terms of increasing more cuts even though it sacrificed the most in crude cuts.
”That’s a major shift in production but that’s to show that OPEC is very committed within its ability to do all that it can to put stability in the market.
”If you see all the talks I’ve given in the last months, it’s on course because at the end of the day the answer is what we were supposed to be which is the least cost-producer.
”When you see a country like Nigeria, begin to produce almost at the same price as shale. Then, something is fundamentally wrong.
”You have to go back in-house, it’s no longer an OPEC issue but an internal issue that you’ve got to deal with and the race is on.
”Saudi Arabia is producing at about eight or nine dollars and you are busy struggling on how to bring yours from 27 dollars, 23 dollars to 18 or 15 million.
“You’re way behind the pack and if you don’t do that quickly with all the resurgence of alternative fuel sources, including electricity then you are way behind the pack, you have a real riot in your hands.’’
On the crude cuts, he said there was enough incentive to want to keep doing it as it had put crude price in the 50 dollars bracket as against 20 dollars previously.
He also forecast that prices would not fall but be around 55 dollars per day by year end.
He said Nigerians could expect a better deal on gas by next year as parameters had been laid to increase the number of households that used the commodity.
Kachikwu also said some companies had indicated interest to build modular refineries in each state of the Niger Delta and his wish was to build two per state instead of one.
He revealed that the Maritime University in the Niger Delta had taken off with an initial grant of N5 billion and had gotten the first tranche of N2 billion.
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