The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.
The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).
The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.
The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.
According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.
The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.
Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.
NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.
This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.
The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.
Nigeria’s Oil Production Increase – Report
The most recent monthly survey conducted by Reuters has revealed that the Organization of Petroleum Exporting Countries (OPEC) continued to increase its oil production in November under the OPEC+ agreement, but the organization went on pumping less crude oil than its share of the monthly increase just as Nigeria started to see an increase in production.
The country’s oil production had been short until last month when Shell Petroleum Development Company of Nigeria (SPDC) resumed crude exports from the Bonny Light terminal after repairs to a pipeline that had started leaking.
Issues with operation have hindered the country’s crude oil production throughout the second half of the year, with disturbances at other terminals including Forcados, Brass River, Erha, and Qua Iboe.
In the last few months, Nigeria’s production has been below the budgetary benchmark, dropping to 1.37 million barrels per day in October. That rate is 261,000 bpd (barrels per day) below the country’s OPEC+ quota.
Under the OPEC+, the 10 members of the Organization who have been bound by the OPEC+ agreement should be increasing their joint production by 254,000 bpd every month out of the total OPEC+ monthly supply addition of 400,000 bpd.
In November, OPEC’s oil production went up by 220,000 bpd to 27.74 million bpd according to the survey conducted by Reuters. That rise once again fell short of the 254,000 rise which OPEC is expected to implement.
The Reuters survey affirms a trend which began a few months ago, that not all members of the Organization have the ability to produce to their full quotas.
Saudi Arabia, which is OPEC’s top producer and the default leader, saw the biggest increase in production in November. The increase was in line with the country’s target, and the same was seen in Iraq which is OPEC’s second-largest oil producer.
Nigerian production managed a recovery in November from constraints seen in October, but other African oil producers kept on struggling to produce to their targets.
Crude Oil Could Hit $150 a Barrel When Global Economy Fully Reopened
Crude oil price could skyrocket to $150 a barrel when the world economy fully reopened, according to Christopher Wood, the Head of Equity Strategy at Jefferies, an American multinational independent investment bank and financial services company headquartered in New York City.
Brent crude oil, against which Nigerian oil is priced, plunged to $67.46 a barrel on Tuesday amid the uncertainty surrounding the Omicron Covid variant. However, it pared losses on Wednesday, rebounding to $70.94 a barrel as of 3:03 pm Nigerian time.
In spite of about 21 percent decline in the value of the commodity in the last three trading sessions, Wood believed the commodity could rise to as much as $150 per barrel once the world economy fully reopened despite campaigns to halt the use of fossil fuel and embrace more environmentally friendly energy.
Explaining the modalities for his position, he said crude oil rose to over $80 a barrel with the partial reopening of the global economy, this he said was largely due to high demand for fossil fuels even without the usual investment incentives in the sector.
“Oil got to over $80 with a lot of Asia closed,” and China’s borders are effectively still closed, he said, in reference of Beijing’s strict zero-Covid approach. “In a really fully reopened world, the oil price could go to a $150 dollars because the supply constraints are dramatic.”
He claimed the political attack on fossil fuels in recent years was the reason incentive for investment in the sector dropped in spite of its lingering importance, adding that 84 percent of the world’s energy in 2020 was met by fossil fuels.
According to him, because nobody is really investing in fossil energy, supply constraints will continue to support prices, which could hit $150 a barrel.
“The issue for me is not the oil price, the issue is the pandemic. The oil price is gonna go higher in a fully reopened world because nobody’s investing in oil but the world still consumes fossil fuels,” he said.
“So oil can go much higher and that can definitely escalate an inflation scare,” Wood said.
Oil Prices Drop 3 Percent on Tuesday After Moderna’s CEO Comment
Oil prices tumbled more than 3% on Tuesday after Moderna’s CEO cast doubt on the efficacy of COVID-19 vaccines against the Omicron coronavirus variant, spooking financial markets and adding to worries about oil demand.
The head of drugmaker Moderna told the Financial Times that COVID-19 vaccines are unlikely to be as effective against the Omicron variant of the coronavirus as they have been against the Delta variant.
Brent crude futures fell $2.32, or 3.2%, to $71.12 a barrel at 0912 GMT after slipping to an intraday low of $70.52, the lowest since Sept. 1.
U.S. West Texas Intermediate (WTI) crude futures fell $2.15, or 3.1%, to $67.80 a barrel, off a session low of $67.06, the weakest since Aug. 26.
Fed Chairman Jerome Powell will also tell U.S. lawmakers later in the day the variant could imperil economic recovery, prepared remarks show.
“The economic impact is driven by fear, and by the policy response… Fear is impacting travel. There are outright bans. But also the fear of being stranded which causes travel plans to alter,” Paul Donovan from UBS said in a note.
Oil plunged around 12% on Friday along with other markets on fears the heavily mutated Omicron would spark fresh lockdowns and dent global oil demand. It is still unclear how severe the new variant is.
With a weakening demand outlook , expectations are growing that the Organization of the Petroleum Exporting countries, Russia and their allies, together called OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) to supply in January.
“We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.
Pressure was already growing within OPEC+, due to meet on Dec. 2, to reconsider its supply plan after last week’s release of emergency crude reserves by the United States and other major oil-consuming nations to address soaring prices.
“Following the global strategic reserve releases and the announcement of dozens of countries restricting travel… OPEC and its allies can easily justify an output halt or even a slight cut,” OANDA analyst Edward Moya said in a note.
Still, Citi analysts expect OPEC+ to continue to add more barrels in January.
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