2019 Budget: How Nigeria will realise 2.3 million daily oil target — Officials

Oil rig
Oil rig used to illustrate the story.

Nigeria’s proposed 2.3 million barrels daily crude oil production capacity is achievable, key government officials have said.

Since President Muhammadu Buhari presented the draft Appropriation Bill for the “2019 Budget of Continuity” to the joint session of the National Assembly late last year, critics have continued to express doubt about prospects of meeting both the production and revenue targets.

The biggest criticisms are coming from the chieftains of the main opposition political party, the Peoples Democratic Party (PDP).

Former Vice President and Presidential candidate of the PDP, Atiku Abubakar, said the 2019 budget is fundamentally flawed and unworkable, as the document is “based on grossly exaggerated assumptions that cannot be met.”

Also, the Senate President and Director General of the PDP Presidential Campaign Council, Bukola Saraki, described the budget as “a hopeless document that cannot be implemented.”

Apart from the $60 per barrel oil price benchmark, Mr Abubakar said it was doubtful if the 2.3 million barrels per day oil production capacity will be realised.

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“We all know that throughout 2018, average (oil) production was 1.95 million barrels per day. Indeed, the latest report from OPEC (Organisation of Petroleum Exporting Countries) suggests Nigeria will be required to cut production to 1.65 million barrels per day. This implies revenue targets to implement the budget will not be met,” he said.

Misssed Targets

Since 2014, the country has not met its daily oil production projections due to a combination of factors, including attacks on oil production facilities in the Niger Delta, or reduction in production due to unfavourable crude oil prices.

In 2014, the country’s daily production capacity averaged about 2.2 million barrels against the projected 2.39 million per day in the budget.

Details from a budget implementation monitoring report from the Budget Office of the Federation showed that in 2015, out of about 2.28 million barrels daily oil output that was proposed, only 2.19 million barrels per day were realised.

Similarly, in 2016 only about 1.782 million barrels were realised, out of about 2.2 million barrels oil output proposed for the year, while 1.79 million barrels were produced in 2017 against about 2.3 million barrels benchmark proposed in the budget.

For 2018, out of about 2.3 million barrels per day proposed, about 1.95million barrels per day were realised.

Udoma, Kachikwu, Others Speak

Both the Minister of State for Petroleum Resources, Ibe Kachikwu, and his counterpart in the Ministry of Budget and National Planning, Udoma Udoma, believe the proposed output benchmark is realisable.

During the presentation of the budget details, Mr Udoma said President Buhari directed the Nigerian National Petroleum Corporation (NNPC) to take all possible measures to achieve the oil production target.

Nigeria’s representative to the OPEC, Melee Kyari, says there was no cause for any worry about prospects of the country meeting its production target.

Mr Kyari, who is also the General Manager, Crude Oil Marketing Department of the Nigerian National Petroleum Corporation (NNPC), said a number positive milestones and achievements by the corporation and its partners call for such optimism.

A fortnight ago last month, OPEC members and their non-OPEC allies resolved to cut their production by 2.5 per cent (about 1.2 million barrels per day) effective last January 1 to boost prices and stabilise the market.

With the cut, based on their October 2018 production levels, Mr Kachikwu said Nigeria will henceforth be producing an average of 1.78 million barrels of crude oil per day (bpd) till further notice.

The OPEC is expected to review the decision in the next six months either to extend the duration of the cut, or terminate it.

Regardless, Mr Kachikwu said the country, which aims at producing about 2.3 million barrels per day in 2019, will have an additional boost with the production of first oil from the 200,000 barrels per day capacity Egina oilfield by Total.

The deep-water oil field is operated by Total Exploration & Production, in partnership with the NNPC, Chinese National Oil Company, South Atlantic Petroleum (Sapetro) and Petrobras of Brazil.

It is located some 130 kilometers off the coast of Nigeria at water depths of over 1,500 meters, is one of Nigeria’s ultra-deep offshore oil concessions.

The Group Managing Director of the NNPC, Maikanti Baru, described the achievement of first oil production from the oil field on December 29, 2018, as a landmark achievement that would boost Nigeria’s production capacity.

“The addition of about 200,000 barrels of oil production from the Egina Floating Production Storage and Offloading (FPSO) was the industry’s major milestone achievement in 2018,” Mr Baru said.

Besides, Mr Kachikwu said Nigeria still has the added advantage to raise its oil output even further with an additional 500,000 to 600,000 barrels of condensates, which is not usually factored into the computation by OPEC of its members’ production figures.

“If it is pure crude, it raises certain other implications in terms of the OPEC quota. However, if it is condensate, then obviously we will smile,” the minister was quoted to have told Reuters recently.

The NNPC in its Monthly Financial and Operations Report for September 2018 said the country’s total crude oil production in August was higher by 4.46 million barrels, or 7.76 per cent to average approximately 2 million barrels per day compared to the previous month.

The cumulative production of Nigerian Petroleum Development Company (NPDC) from all fields between August 2017 and August 2018 stood at about 51.02 million barrels of crude oil, or an average daily production of 128,834 barrels per day.

“NPDC is projected to ramp-up production level to about 250,000 barrels per day in the near future,” the report said.

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