The Group Managing Director of the NNPC, Mallam Mele Kyari, painted a gloomy picture of the Nigerian economy in the months ahead, appealing to industry captains and Nigerians, to be prepared for very lean times.
Crude oil and LNG are Nigeria’s main dollar earners, but the sector is facing turbulence in the international market, with Russia and Saudi Arabia declaring a price war, amidst market slump because of the coronavirus pandemic.
Most shocking, he said the country has been unable to sell 50 cargoes of crude and 12 cargoes of Liquified natural gas.
Kyari spoke Wednesday at the Central Bank of Nigeria Round Table discussion.
According to his presentation, Nigeria cannot join the price war as the cost of producing a barrel is between $15 and $17, unlike Saudi Arabia with a $4-5 cost.
But looking into the future, he said the NNPC would work towards reducing the cost of crude oil production in Nigeria to create market for Nigeria’s crude and make Nigeria a choice destination for Foreign Direct Investment.
He noted that due to the uncertainties of the global crude oil market, countries that produce at the cheapest price would remain in the market while jurisdiction with high cost of crude oil production would not be able to cope with the competing prices.
He noted that due to the Coronavirus pandemic, Nigeria has about 50 cargoes of crude oil that have not found landing, adding that this implies that there are no off-takers for them for now due to drop in demand.
“Today, I can share with you that there are over 12 stranded LNG cargoes in the market globally. It has never happened before. LNG cargoes that are stranded with no hope of being purchased because there is abrupt collapse in demand associated with the outbreak of coronavirus,” Mallam Kyari submitted.
He said that in the face of the Coronavirus global pandemic, countries like Saudi Arabia have given discount of $8 and Iraq $5 to their off-takers in some locations meaning that when crude oil sells at $30 per barrel, countries like Saudi Arabia is selling at $22 per barrel and Iraq selling their crude at $25 per barrel.
The GMD said the NNPC was working round the clock to increase the countries daily production to 3million barrels per day and shore up the crude oil reserves to 40billion barrels.
Mallam Kyari called on government at all levels, captains of industries and the organized private sectors to brace up for the new low regime of global crude oil prices, adding that realistic estimates must be made to reflect the current realities of the crude oil market.