Group Managing Director of the Nigerian National Petroleum Corporation
(NNPC), Mallam Mele Kyari, Monday, hinted of a possible deregulation of
the Nigerian downstream petroleum sector, stating that the Federal
Government has eliminated subsidy and under recovery in the industry.
Speaking in an interview monitored on a television programme in Abuja, Kyari said, “There is no subsidy and it is zero forever.
Going
forward there would be no resort to either subsidy or under recovery of
any nature. NNPC will play in the marketplace, it will just be another
marketer in the space.
But we will be there for the country to sustain security of supply at market price.”
Kyari further disclosed that Nigeria’s crude oil and condensates output has risen to 2.3 million barrels per day.
He
stated that the output growth, which was achieved on Sunday, was the
first time the country was hitting that milestone in very many months
and years.
He noted that despite the glut in crude oil supply
across the world due to the Novel Coronavirus (COVID-19) pandemic, the
country was still getting buyers for its crude oil, while he added that
the number of stranded vessels carrying Nigeria’s crude oil had dropped
to less than 20.
He said, “There is no challenge with that. The
buyers have choice now. Choice of quality and choice that is associated
with distance. These two factors will determine which crude oil
consumers buy. Our major source of trade is Europe, followed by Asia,
particularly India. “
And in times like this when crude oil
prices go down, what buyers do is to buy the cheap crude available and
take them into storage. So the way to gauge this is when your buyers do
not return the crude after six days of purchase. For by contract, after
allocation of a cargo, the buyer is supposed to come back to you within
six days and say I cannot take this. There is a legitimate right to do
that.“
But none of our partners have come to tell us that they
cannot take our crude and it is way pass the six days. This means that
they have found value for this crude. Value here does not necessarily
mean taking it into the refineries, it can mean taking it into storage
or even floating it in the vessels. That is why people are now using
these vessels as storage facility because they know that a change in
price will come very shortly.“
When we say that our crude is
stranded, it means that at a point in time when traders are not able to
tell you where they are taking it to. It does not mean they did not buy
it. It means that you have to watch, although there is concern because
they have not come back to take the next cargo.“
When we reported
stranded cargo it means that our partners are unable to find a way
around it as at the point in time we reported. But I am happy to
announce that that number has gone down substantially, I don’t have the
exact numbers for today, but it is now less than 20.”
Kyari
further projected that crude oil prices would end the year at an average
of $30 per barrel going by global economic trend.
He said, “The
change in price as at this morning means that people are recovering
from the impact of COVID-19 and it means that countries will go back to
work and consumption will gradually recover. But if the pandemic does
not reduce to a point where you have at least 75 per cent of people
coming back to work, then you will have a challenge. But once about 80
per cent of the world population return to work, then our crude will be
sold and there are no concerns. “
In every country, like in our
own country, we have some facilities that produce at more than $30 per
barrel and there are also those that produce at below $20, say $15, $16,
$17 per barrel. So at times like this you focus on assets that produce
at low costs. “
Also at time you see people trying to see if they
sell below their production cost and see how they can sustain it for
the few months that the challenge will last and work towards closing the
gap. We are looking at all options.”
Kyari further stated that
Nigeria was endowed with premium crude oil grades which is supplied to
Europe, Asia and India, stressing that despite the COVID-19 pandemic
which has affected demand and supply fundamentals, all of Nigeria’s
export terminals were still in operations.
He said, “The key
issue in crude oil business is market fundamentals of demand/supply. I
believe COVID-19 will subside and countries will come back to life. I
don’t see oil price going below the $20 we saw last week. I’m certain,
all things being equal, oil price will bounce back.”
The NNPC’s
helmsman assured Nigerians of ample supply and distribution of petroleum
products, stating that despite the Coronavirus pandemic, the
corporation had in stock about 2.6 billion litres of petroleum products
that could service the country’s energy needs for the next two months.
Furthermore,
Kyari noted that as part of its contribution to build a robust
healthcare for Nigeria, the Nigerian oil and gas industry is set to
embark on the construction of, at least, two hospitals and a world class
diagnostics center in each of the geopolitical zones in the country, in
addition to the 250 temporary bed facilities that it offers to support
government’s efforts in the fight against the Cronavirus pandemic.
He
explained that the hospitals and the world class diagnostics centers
would be an addition to the regular Corporate Social Responsibility
(CSR) initiatives of the upstream and downstream companies, as well as
service providers operating in the oil and gas industry.
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