Tola Adeyemi, the Regional Senior Partner (Nigeria and West Africa) at KPMG have said that outgoing and incoming government administrations need to tackle crude oil theft and low investments in the sector by oil producers to achieve the 1.69 million barrels per day crude oil benchmark in the 2023 budget.
He stated this on Tuesday, January 10 while presenting the KPMG Budget Day programme on Arise TV. He said:
“Achieving this level of production is going to require tackling the issue of oil theft and investments in the oil sector by the oil producers. This is key and is something that both the outgoing and incoming administrations will need to address. Total non-oil revenues exceed oil revenues, which is good because it speaks to the diversification of the economy, but it also suggests underperformance by the oil sector.
“When we unpack the oil revenues further, we see that they are based on certain assumptions. One important assumption is the level of oil production. The estimated oil production for the year 2023 is 1.69 million barrels per day. This is big considering where we are coming from which is about 1.2 million barrels per day.”
Reasonable benchmark: Also commenting on the benchmark oil production rate, Adewale Ajayi, a partner at KPMG Nigeria, said 1.69 million barrels per day is reasonable. According to him, some factors will determine global crude oil prices and production, which will, in turn, affect Nigeria’s production. He said:
“What is going to happen with the ongoing Russia-Ukraine war, and how long is it going to last, of course, we need to consider the reaction of the Organization of Petroleum Exporting Countries (OPEC) to challenges facing the oil sector. Also, is the global oil market going to have a buyer cartel? Looking at these factors, I think it is clear that the global oil market is in deficit so we expect that there will be a reduction in oil supply but it will not be enough for OPEC to change its production per day.”
Ajayi explained that the Nigerian government has made some efforts to tackle security issues that hampered crude oil production in 2022. Now, the country’s current oil production has gone up to 1.2 million barrels per day.
He, however, stated that although Nigeria is still unable to meet the 1.8 million barrels per day OPEC quota, things are currently looking up, and oil companies now feel confident enough to inject more oil into terminals/pipelines.
For the record: Tola Adeyemi in his presentation also highlighted the fact that fuel subsidy payments removal will require courage and political will on the part of the next administration following the outcome of the forthcoming general elections in February 2023.