Nigerians have been warned to brace up for more challenging periods, as the fortunes of the global oil prices dwindle. The warning came from the Group Managing Director, NNPC, Mele Kyari today.
The NNPC boss explained that the liquid crude has been badly hit and the market remains largely unpredictable.
Kyari referred to the impact of the Coronavirus outbreak, and the ongoing price war in crude oil supply, which caused market crashes in a manner that is indicative of a global recession.
“As at today, Nigeria has some 50 cargoes of crude that have not found landing. This means that the traders do not know where to take these projects to,” he said.
He added that Nigeria is not the only country affected, as Saudi Arabia and Iraq are also battling similar challenges. “As at yesterday, Iraq dropped their prices by $5 and Saudi Arabia by $8 to some locations. When your crude oil sells at $30 and you are dropping it by $8, this means that you are seeking at $22 in the market.”
Kyari noted that today, there are over 12 stranded LNG cargoes globally, a situation which has never been seen before. Countries with a lower production cost of $15-$17 per barrel can still chest this challenge, but for Nigeria, where the production cost is pegged at $30 per barrel, “a fall of price to $30-$32 per barrel means you are already out of business,” he said.
The NNPC boss further stated that Nigeria would have to bear the depression for much longer even if the prices return to normal.
“So prepare for trouble for 3months, even if the price goes back to $58, you have to have a backlog of production to cushion the effect. In effect, we are going to have the impact of the low prices for a while to come.”
He noted that there were conservative estimates that put the minimum daily crude demand in 2020 at 100 million barrels, implying that fossil fuel would remain significant contributor to the total energy mix in the next few decades.
According to him, “What will not be there are inefficient producers, because as we speak today, we are getting production from the least of expected places, and nearly most countries are in oil-producing territory.
“What it means is that for the oil market, the best of people who will remain are the ones who will produce oil at the cheapest cost. And until you do that, the oil market will run without you and your economy will go aground.”