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Nigeria Oil In High Demand – NNPC

Mallam Mele Kyari, NNPC's Group General Manager, Crude Oil Marketing Division

As Nigeria continues to ensure stability and improvement in oil production, the country will become more critical to the supply and demand structure of the global oil market.

Mr. Mele Kyari, Group General Manager, Crude Oil Marketing Department, NNPC, revealed this during a presentation on production outlook for Nigeria in Geneva, Switzerland.

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He said the quality of the Nigerian crude and the recent intervention of the current administration in the country to ensure stability and increase production would make Nigeria’s oil more sought after by the world.

He said: “Nigeria has the second largest reserve in Africa today, about 37 billion barrels. What that means is that if we continue to produce at the current level without doing anything, we will still be producing for the next 35-40 years. It means Nigeria will continue to be a supplier of at least 2 million barrels of oil to the international oil market. So, the point here is that Nigeria cannot be ignored in the global oil market,

“Nigeria is very critical in the global oil market, in the demand and supply balancing. We are very conscious of our position in the international oil market,

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“I don’t need to tell you that the Nigerian crude is probably the best in the market. It is such that the world is looking for the Nigerian crude. That emphasizes the fact that we’re selling to the world.”

The Nigerian oil marketer also revealed that in 2018, India is the largest single buyer of Nigerian crude, followed by the Netherlands. But of significant, he stressed, was the fact that the United States took about 8.5 percent of total Nigerian supply to the global market.

On the destination of Nigerian crude in the world, and the country’s future production plan, Kyari says: “Who’s buying Nigerian crude? In 2018 you will see that the Asian-Pacific took more volume than they did in 2017. Europe remains the critical buyer of Nigerian crude. But what is also obvious is that we’re also selling to the United States. There is a reverse flow from Nigeria going into the US for reasons of quality and others,

“So what is next? What is the outlook? I can say clearly that the world will need Nigeria crude and we’re going to sell to the world, particularly as we have more stability in supply dynamics and we’re rightly priced.”

He disclosed that the country is currently producing at an average of 2 million barrels per day, a significant increase from the 2016 figure which was below 1.7 million.

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He said contrary to speculations by some in the international market that Nigeria was going to suffer more outages in oil production, the country has achieved more stability and growth due to more investments in exploration and confidence in the system.

Kyari stressed that lack of commitment by previous governments to fund joint cash-calls was responsible for low exploration activities since partners were unwilling to take the risk of committing their own resources. He said with the current strategic intervention activities of the NNPC, the country could easily hit 2.3 million in 2019.

“So why are we making this projection? What has changed? The first issue is why did we have those outages n the past. The reason are simple-we were not investing in production, not because there was no money. But because our production arrangement is such that Government contributes funds to our JV Partners so that we can collectively fund our cash-calls. For over five years until 2015, we were not just investing. And the result of that is that we under-invested our share of the cash-call to about eight billion dollars for just one stream-the joint aspect of our business by mid of 2015,

“What that means is that our joint partners were no longer contributing money, they could not risk their resources. And therefore over time we scaled down exploration activities, we scale down on taking FIDs. And eventually a natural decline sets in, and your assets integrity goes down and by 2015 we were really in trouble,

“So, when we had a change in approach and in management, and of course in government itself, a deliberate action was taken. First how can we settle our legacy debts? We had engagement with our partners and agreed on a five-year plan for liquidating our past debts. And also to ensure that we are current on our cash-calls as it is happening today. And that is why you see a gradual return to investments in exploration, return to taken FIDs and other investments bothering on the integrity of our facilities, particularly the off-shore facilities,

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“The second issue which is known to all of us is the insurgency in the Niger Delta and the issue of vandals, and we don’t hide that. That became very prominent up till 2016. What did we do differently? First, as a government we put up a security structure that has taken care of some of the vandalism. And there is a clear engagement which was absent in the past that ensures that the communities now have a stake in these pipelines. The engagement produced some level of sanity and peace in the region. I’m sure in the last six months you have not heard of any outages because of the activities of vandals.”

However, he emphasized that the country’s oil production was still facing some integrity issues which are being addressed.

“And integrity issues came as a result of legacy lack of investments, which we have addressed. And because of that our assets are coming back, and we see this gradual return to appropriate production environment. That has to do with the effort to meet our cash-calls obligation. There are several intervention measures that would ensure our production continues to stabilize and grow,

“The result of that is that there is a change in confidence in the system and by our partners and also by the populace such that at the end of the day we will see a gradual stability in the Niger Delta region. You need to know this so that you can see that the number being thrown around about possible outages in Nigeria may not happen. “

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