The Organization of the Petroleum Exporting Countries (OPEC) recently released its 2015 World Economic Outlook.
The report emphasized the role oil will continue to play in satisfying the world’s energy needs for the next 25 years.
Oil prices have been declining steadily for a year now, the average price of the OPEC Reference Basket (ORB) during the first half of 2014 was over $100/barrel, it dropped to less than $60/b in December 2014 and has averaged close to $53/b in the first nine months of 2015. The price as at today is hovering around $35/b.
However, OPEC gave a glimmer of hope stating that oil prices will go up slowly over the next few decades.
Calculations from OPEC says that the long-term value of the ORB in this Outlook is assumed to rise from more than $70/b in 2020 to $95/b in 2040 (both in 2014 dollars). Correspondingly, nominal prices reach $80/b in 2020, rising to almost $123/b by 2030 and more than $160/b by 2040. These long-term prices are slightly lower than last year’s assumptions, when prices were assumed to be at $104/b by 2040 (in 2014 dollars).
OPEC however warned that the assumed price does not represent the OPEC Secretariat’s price forecast or a desired price path for OPEC crude, and that the prices stated should only be considered as a working assumption for the Reference Case scenario.
According to OPEC, some capacity expansion could be forthcoming in Nigeria by 2020, either through the rehabilitation of existing refineries – in part to raise their utilization rates – or through grassroots projects. Several refining projects have been announced and Nigeria is currently seeking partnerships with foreign investors for their implementation. They also mentioned the Dangote 500,00 b/d Refinery project which currently adds to almost half of the $18 billion in oil investment projects in Africa.
Nevertheless, this still calls for a major shake up for Nigerian Government who still seem likely to depend on oil for the next few years. The period of low oil prices will remain so long as the glut in the market remains.