• Okonjo-Iweala worried
• Govt explores options as wasteful spending continues
increasing reliance on unconventional energy sources in the United States (U.S.) and a decrease in the country’s import of crude oil from Nigeria have stirred anxiety among officials in Abuja.
The rising dependence of the U.S. on internal supply of fuel has made the country’s crude oil import from Nigeria to slump from 810,000 barrels in the previous year to 361,000 in July.
Nigeria’s Co-ordinating Minister for the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, captured the Federal Government’s worry when she told The Guardian in a telephone interview: “Yes, every Nigerian should be concerned about these developments. There has been a spate of studies, articles and other information on increased availability of Shale gas and more oil in the U.S. due to more exploration.
“In fact, the U.S. has just given Vitol & Shell licences to export oil from the U.S. for the first time. U.S. demand for outside oil is still there but decreasing. These are some of the reasons we went for a sensible $75 benchmark price in view of the changing nature of oil supplies in the world’s principal markets and the possible impact on demand.
“The discovery of Shale oil and gas in the U.S. are long-term fundamental factors that we must pay attention to. Nigeria cannot afford to bury her head in the sand oblivious to changing energy trends in the world. It is in our best interest to respond proactively to these trends. The consequences of not doing so could be very unpleasant not only for us but future generations too.”
But Nigeria is taking some measures in response to the development. It is currently exploring other countries it would sell its crude oil to address the impact of the sharp reduction in the U.S. demand for Brent crude.
Last week, Patrick Kulsen, an oil market analyst at PJK International, a research company in The Netherlands, told the Wall Street Journal that other markets were filling in the gap. According to Kulsen, “that slice that goes to the U.S. will be less and more will go to Europe and Asia.”
This indicates a sharp drop in the volume of oil import from Nigeria, which is considered as the most dependable source of its oil needs from Africa.
As Abuja bureaucrats and policy analysts were studying the dire situation last night amidst big spending plans in the budget proposals for 2013, a spokesman in Nigeria’s oil company, the Nigerian National Petroleum Corporation (NNPC) said there was no cause for alarm as options were being explored to mitigate the effects of the U.S. demand shift on energy import from Nigeria.
The General Manager in charge of Media Relations of the Group Public Affairs Division of the NNPC, Dr Omar Farouk told The Guardian at the weekend that “just as the U.S. reserves the right to source its energy needs elsewhere, Nigeria also has the right to diversify its oil markets.”
The 361,000 barrels per day are a far cry from the 810,000 barrels a day imported by the U.S. in the corresponding period of last year (2011) and more than one million barrels per day in 2010. The data also indicate that Nigeria’s total crude exports have topped two million barrels a day for five of the past seven years.
The data notwithstanding, Farouk said the low patronage of the Nigerian Brent crude oil by the U.S. had not been largely noticed, adding that there had been no glut of unsold oil in the country.
He stated further: “Well, I don’t know why there is reduction in the volume of Nigerian crude that the U.S. buys. But Nigeria is also ensuring that we don’t rely on just one major buyer. Efforts are on to diversify the markets so that Nigeria is in a position to sell its crude to many countries. As I speak, there is no glut of Nigerian crude oil in the international market. The figure of barrels that we produce as a nation has not dropped and there is no report that Nigeria cannot sell its products. Overall, I don’t think that the drop in the volume is a policy matter. There is no cause for alarm.”
Many reasons have been cited as influencing the response of the U.S. to the international oil market.
Some of the reasons are: that Brent crude, which Nigeria produces may soon find the market restricted as global energy flows are redrawn because of growing unconventional oil production and also the coming on stream of Libya into the fold after admission following Muammar Gaddafi’s death.
The cumulative result of these two developments could mean that Europe would be the new sanctuary for Brent crude to flow.
Another critical factor an expert told The Guardian last night is the sophistication of refineries worldwide, which Nigeria is not in a hurry to explore in a global context to maximise its segmented market share.
Developed refineries across the world can now process heavier, sour grades of crude, which are considered generally cheaper and then refine them into high-end products. Thus, this technological advancement will undoubtedly lessen demand for the lighter sweet grades that Nigeria produces.
But a trade unionist in the oil and gas industry does not share the optimism of the NNPC spokesperson. “This development should be a cause for concern”, the President of the Trade Union Congress (TUC), Peter Esele, told The Guardian at the weekend.
Esele said that the U.S. decision to reduce oil imports from Nigeria was basically a pure economic decision in the national interest of the U.S. as a sovereign nation and it should be interpreted purely on that premise.
He said that the development was a wake-up call to Nigeria’s leadership that the time to look inwards and diversify the economic base of the country had indeed come.
He said: “I will not see the development as punitive. It is basically an economic decision that is considered good for them. Every country has the right to make economic decisions for the betterment of the citizenry. I want to see it as a timely warning to Nigeria. Having more than 90 per cent of our income coming from oil alone will lead us into danger any time soon. We spend money as if there is no tomorrow. There is no plan on how to move the country forward if oil suddenly dries up.”
He submitted that Nigeria must begin to devise the means by which it could reap the full benefits of its demographical strength and then increase budgetary provision for capital expenditure instead of over-bloated recurrent expenditure.
“With a population of more than 160 million people, there is a vast market that is big enough to feed itself by providing massive jobs for its people. How can we have 51 per cent, sometimes 72 per cent, of our annual budget going into recurrent? We cannot make any headway economic wise. What we should do is to have respect for our laws by ensuring we allow the law to work and guide daily activities. We also need to raise regulatory frame-works that can sustain economic policies for meaningful economic development and not jobless growth we are celebrating now,” he said.
Esele also condemned the penchant of ministers for globe-trotting under the guise of soliciting investment when the basic infrastructure for economic activities are lacking.
According to him, the time to plan Nigeria’s economy is now, as the biggest buyer of the nation’s oil is finding alternatives.
These developments came at the weekend just as Nigeria’s foreign exchange reserves rose to $42.02 billion by October 17, the highest in 32 months and an increase of 3.11 per cent, month-on-month, latest figures from the central bank showed on Friday. Africa’s top energy producer’s forex reserves were last around this level on February 17, 2010 when they hit $42.22 billion. The reserves were at $40.75 billion a month ago.
In contrast, Africa’s economic giant, and only member of G-20 and BRICs, South Africa’s net gold and foreign exchange reserves rose to $48.748 billion at the end of September from $48.278 billion in August, data from the Reserve Bank showed on Friday too.
Gross reserves were at $50.979 billion in September from $49.991 billion in August while the forward position, which represents the bank’s unsettled spot or swap transactions, fell to $5.623 billion from $5.937 billion in August.
Nigeria is the largest oil producer in Africa and has been a member of the Organisation of Petroleum Exporting Countries (OPEC) since 1971. In 2011, Nigeria produced about 2.53 million barrels per day (bbl/d) of total liquids, well below its oil production capacity of over three million bbl/d, due to production disruptions that have compromised portions of the country’s oil for years. The Nigerian economy is heavily dependent on the oil sector, which accounts for over 95 per cent of export earnings and about 40 per cent of government revenues, according to the International Monetary Fund (IMF).
• Govt explores options as wasteful spending continues
increasing reliance on unconventional energy sources in the United States (U.S.) and a decrease in the country’s import of crude oil from Nigeria have stirred anxiety among officials in Abuja.
The rising dependence of the U.S. on internal supply of fuel has made the country’s crude oil import from Nigeria to slump from 810,000 barrels in the previous year to 361,000 in July.
Nigeria’s Co-ordinating Minister for the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, captured the Federal Government’s worry when she told The Guardian in a telephone interview: “Yes, every Nigerian should be concerned about these developments. There has been a spate of studies, articles and other information on increased availability of Shale gas and more oil in the U.S. due to more exploration.
“In fact, the U.S. has just given Vitol & Shell licences to export oil from the U.S. for the first time. U.S. demand for outside oil is still there but decreasing. These are some of the reasons we went for a sensible $75 benchmark price in view of the changing nature of oil supplies in the world’s principal markets and the possible impact on demand.
“The discovery of Shale oil and gas in the U.S. are long-term fundamental factors that we must pay attention to. Nigeria cannot afford to bury her head in the sand oblivious to changing energy trends in the world. It is in our best interest to respond proactively to these trends. The consequences of not doing so could be very unpleasant not only for us but future generations too.”
But Nigeria is taking some measures in response to the development. It is currently exploring other countries it would sell its crude oil to address the impact of the sharp reduction in the U.S. demand for Brent crude.
Last week, Patrick Kulsen, an oil market analyst at PJK International, a research company in The Netherlands, told the Wall Street Journal that other markets were filling in the gap. According to Kulsen, “that slice that goes to the U.S. will be less and more will go to Europe and Asia.”
This indicates a sharp drop in the volume of oil import from Nigeria, which is considered as the most dependable source of its oil needs from Africa.
As Abuja bureaucrats and policy analysts were studying the dire situation last night amidst big spending plans in the budget proposals for 2013, a spokesman in Nigeria’s oil company, the Nigerian National Petroleum Corporation (NNPC) said there was no cause for alarm as options were being explored to mitigate the effects of the U.S. demand shift on energy import from Nigeria.
The General Manager in charge of Media Relations of the Group Public Affairs Division of the NNPC, Dr Omar Farouk told The Guardian at the weekend that “just as the U.S. reserves the right to source its energy needs elsewhere, Nigeria also has the right to diversify its oil markets.”
The 361,000 barrels per day are a far cry from the 810,000 barrels a day imported by the U.S. in the corresponding period of last year (2011) and more than one million barrels per day in 2010. The data also indicate that Nigeria’s total crude exports have topped two million barrels a day for five of the past seven years.
The data notwithstanding, Farouk said the low patronage of the Nigerian Brent crude oil by the U.S. had not been largely noticed, adding that there had been no glut of unsold oil in the country.
He stated further: “Well, I don’t know why there is reduction in the volume of Nigerian crude that the U.S. buys. But Nigeria is also ensuring that we don’t rely on just one major buyer. Efforts are on to diversify the markets so that Nigeria is in a position to sell its crude to many countries. As I speak, there is no glut of Nigerian crude oil in the international market. The figure of barrels that we produce as a nation has not dropped and there is no report that Nigeria cannot sell its products. Overall, I don’t think that the drop in the volume is a policy matter. There is no cause for alarm.”
Many reasons have been cited as influencing the response of the U.S. to the international oil market.
Some of the reasons are: that Brent crude, which Nigeria produces may soon find the market restricted as global energy flows are redrawn because of growing unconventional oil production and also the coming on stream of Libya into the fold after admission following Muammar Gaddafi’s death.
The cumulative result of these two developments could mean that Europe would be the new sanctuary for Brent crude to flow.
Another critical factor an expert told The Guardian last night is the sophistication of refineries worldwide, which Nigeria is not in a hurry to explore in a global context to maximise its segmented market share.
Developed refineries across the world can now process heavier, sour grades of crude, which are considered generally cheaper and then refine them into high-end products. Thus, this technological advancement will undoubtedly lessen demand for the lighter sweet grades that Nigeria produces.
But a trade unionist in the oil and gas industry does not share the optimism of the NNPC spokesperson. “This development should be a cause for concern”, the President of the Trade Union Congress (TUC), Peter Esele, told The Guardian at the weekend.
Esele said that the U.S. decision to reduce oil imports from Nigeria was basically a pure economic decision in the national interest of the U.S. as a sovereign nation and it should be interpreted purely on that premise.
He said that the development was a wake-up call to Nigeria’s leadership that the time to look inwards and diversify the economic base of the country had indeed come.
He said: “I will not see the development as punitive. It is basically an economic decision that is considered good for them. Every country has the right to make economic decisions for the betterment of the citizenry. I want to see it as a timely warning to Nigeria. Having more than 90 per cent of our income coming from oil alone will lead us into danger any time soon. We spend money as if there is no tomorrow. There is no plan on how to move the country forward if oil suddenly dries up.”
He submitted that Nigeria must begin to devise the means by which it could reap the full benefits of its demographical strength and then increase budgetary provision for capital expenditure instead of over-bloated recurrent expenditure.
“With a population of more than 160 million people, there is a vast market that is big enough to feed itself by providing massive jobs for its people. How can we have 51 per cent, sometimes 72 per cent, of our annual budget going into recurrent? We cannot make any headway economic wise. What we should do is to have respect for our laws by ensuring we allow the law to work and guide daily activities. We also need to raise regulatory frame-works that can sustain economic policies for meaningful economic development and not jobless growth we are celebrating now,” he said.
Esele also condemned the penchant of ministers for globe-trotting under the guise of soliciting investment when the basic infrastructure for economic activities are lacking.
According to him, the time to plan Nigeria’s economy is now, as the biggest buyer of the nation’s oil is finding alternatives.
These developments came at the weekend just as Nigeria’s foreign exchange reserves rose to $42.02 billion by October 17, the highest in 32 months and an increase of 3.11 per cent, month-on-month, latest figures from the central bank showed on Friday. Africa’s top energy producer’s forex reserves were last around this level on February 17, 2010 when they hit $42.22 billion. The reserves were at $40.75 billion a month ago.
In contrast, Africa’s economic giant, and only member of G-20 and BRICs, South Africa’s net gold and foreign exchange reserves rose to $48.748 billion at the end of September from $48.278 billion in August, data from the Reserve Bank showed on Friday too.
Gross reserves were at $50.979 billion in September from $49.991 billion in August while the forward position, which represents the bank’s unsettled spot or swap transactions, fell to $5.623 billion from $5.937 billion in August.
Nigeria is the largest oil producer in Africa and has been a member of the Organisation of Petroleum Exporting Countries (OPEC) since 1971. In 2011, Nigeria produced about 2.53 million barrels per day (bbl/d) of total liquids, well below its oil production capacity of over three million bbl/d, due to production disruptions that have compromised portions of the country’s oil for years. The Nigerian economy is heavily dependent on the oil sector, which accounts for over 95 per cent of export earnings and about 40 per cent of government revenues, according to the International Monetary Fund (IMF).
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