- Not Yet a Threat, Kachikwu Insists
While reservations on the current trend in oil prices had been expressed by experts, Kachikwu however, stated that it was not yet that a trouble for Nigeria to lose sleep over.
Speaking in an interview on Arise News Network in Abuja, within the past week, the minister stated that the current downward movement in prices was not yet a threat to Nigeria’s economic recovery.
He said it would be alarmist to consider this a threat to the country’s economy, adding that Nigeria still sells most of its crude oil blends well above $50 per barrels.
Kachikwu also stated that member countries of OPEC were alert to the current price movements as well as the resurgence of shale oil production, and would react to the changes as required.
He explained that members of OPEC were already beginning to explore opportunities to engage US oil producers to join their efforts to stabilise prices, adding that he was optimistic the US would join the joint efforts of OPEC and non-OPEC members on price stability.
He also stated that Nigeria’s crude oil production was down to 1.7 million barrels a day (mbd) following scheduled maintenance works by Shell and ExxonMobil.
“I wouldn’t be that alarmist frankly. We are still in the $50 range; in fact some of our key product components are selling above $50 per barrel. Forcados is about $52, Bonny Light is about $51.5, so we are over and above the $50 threshold,” said Kachikwu in a response to a question on the country’s response to the drop in oil price.
Despite the derived price drop, Kachikwu said: “We have always projected that given the incentives that higher prices create for shale producers, it will see a spurn reaction, and let’s face it, the Trump presidency era creates a lot of incentives for people to go back into shale production, we’ve always anticipated that and we knew we were going to flip-flop in the $50 range.”
He further stated with optimism: “I expect as the winter season gets towards the end and a lot more consumption begins for those who do summer holidays, you are going to see movements in all that, my projection is that we, still, will end the year on an average of $54, $55 per barrel, that is one of the things OPEC is focused”.
“Bear in mind that Saudi Arabia and all the other producers in OPEC have always said that as we watch those numbers build, there is a need to take more drastic actions, and I think that is something we are taking very seriously.
“Over and above that, continuous engagement continues with the like of Russia, Mexico and the rest, and we are even beginning to look for windows of talking to the United States because it is in the long-term interest of everybody that there is stability in the price of oil.
“Bear in mind that the infrastructure for oil production is coming out of the US, this doesn’t just impact nations like Nigeria, it also impacts nations with huge technological input base into oil production and for that matter a lot of American oil companies are cut right in the web of this and their survival depends on the stability of this market. So, sooner or later, just like Russia did came on board, I am one of those who are optimistic that America will come on board,” he explained.
He stated that while US shale oil was still a challenge to OPEC members, their low production costs were still an advantage, adding that OPEC members could leverage this to hold on to a comfortable market share.
“I’ve been able to get everybody interested in maintaining some stability in oil price and so it is not a clobbering issue, it is work in progress, it is taking each season at a time and seeing what develops and at some points, even the shale producers are going to realise, just like what happened the last time, that the further the price drops, the lesser the ability to survive as a business entity, I think that these things will even out. The first salvos were fired by OPEC in the first cuts; there, probably, would be some more cuts that would follow both between OPEC and non-OPEC.
“But more important as I keep saying is that at the end of the day, the least cost producers are still the OPEC members and that is what we are pushing aside. As we focus on price increasing, the more critical thing that OPEC countries must begin to focus is on how they will ensure that prices remain the most least cost, and that is where countries like Nigeria is challenged and we need to do a lot more work in this, and we are working on that,” he noted.