Abuja, Nigeria. Sept 14th: Nigeria’s Minister of State for Petroleum Resources, Dr Ibe Kachikwu, told journalists in Abuja, that at the expiration of Nigeria’s crude-cut exemption in March, 2018, Nigeria would seek an extension from the Organization of Petroleum Exporting Countries (OPEC).
After enjoying the facility twice, Dr Ibe Kachikwu insisted that 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.
Ibe Kachikwu said that OPEC had no intention of giving an extension and taking it back, but ”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.”
The minister said that he wouldn’t do anything to jeopardise OPEC’s rules. He said the nation was undergoing massive problems in terms of liquidity, income, predictability and financing of projects. He reiterated that Nigeria was given the 1.8 million bpd maximum production, adding that technically, it would not change.
On pipelines that were damaged, Ibe Kachikwu said it would take a while to restore them.
The minister said the industry should be concerned with reducing costs of production because competition from Shale oil could now be reached with new technology thereby reducing cost of production and providing more reserve.
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.
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 bracket as against $20 previously. He also forecast that prices would not fall but be around $55 per day by year end.
Nigeria was first exempted for six months and the second time, for nine months, in OPEC’s decision to cut crude production to shore up prices of the product.
Libya and Nigeria are exempt from OPEC’s landmark production cut agreement, and their recovery over the past few months had led to talks among the coalition on whether the two should be asked to join in on the cuts, although Libya’s setback in August may quell some of that discussion.
Photo: OPEC offices
Representatives from Libya and Nigeria have been invited to the September 24 meeting of the OPEC/non-OPEC monitoring committee overseeing the deal to explain their production outlooks. The two members’ combined August average output was 480,000 b/d above their level in October, the benchmark month from which OPEC based its production cuts and quotas.
The agreement, which went into force January 1, calls on OPEC and 10 non-OPEC producers, led by Russia, to cut a combined 1.8 million b/d in output through March 2018 in order to rebalance the market and induce draws of oil in storage.
OPEC’s collective output for August is about 630,000 b/d above its declared ceiling under the deal of about 31.9 million b/d, when Equatorial Guinea, which joined in May, is added in and Indonesia, which suspended its membership in December, is subtracted.