Business

Nigeria slashes 13.67m barrels oil production quota off IOCs

BEARISH

Some of Nigeria’s April and May cargoes have not been sold yet, a sign that demand is so depressed that no one wants even oil at $15 a barrel or less.

 

 

N

igeria, Africa’s biggest crude exporter, has forced down production quota by 13.67 million barrels for Shell, Chevron and other oil producers in one month.

 

This, New Telegraph gathered exclusively, was a computation of 441, 000 barrels daily cut, which the country slammed on production quota for the oil firms in May.

 

Six major firms including Shell, ExxonMobil, Chevron, Total, Agip and Addax participate actively in production of about 90 per cent of the country’s output.

 

The remaining 10 per cent is produced by indigenous firms like Nigerian Petroleum Development Company (NPDC), Seplat Petroleum Development Company; among others.

 

The foot dragging by Nigeria to figure out how and  where to cut production as part of the OPEC+ deal, and this has led to a delay in the May and June crude oil export plans of Nigeria National Petroleum Corporation (NNPC), trading sources said.

 

 

The new OPEC+ production cut deal to remove a total of 9.7 million bpd from the market in May and June entered into force on May 1.

 

Nigeria has been producing 1.412 million bpd in May-June 2020, It will produce 1.495 million bpd in July-December 2020, and 1.579 million bpd between January 2021 and April 2022, as part of the OPEC+ agreement, a document of the Ministry of Petroleum Resources showed.

 

This is in addition to condensate production of 360,000 bpd to 460,000 bpd from which Nigeria is exempt from the cuts, the ministry noted.

 

According to OPEC’s secondary sources in its official production figures for March 2020, Nigeria pumped 1.853 million bpd of crude oil in March, up by 65,000 bpd compared to February.

With this 1.853 million production the previous month and the 1.412 million barrels per day in May, the country, based on the ministry’s data, forced its oil producers to cut a total of 441,000 barrels daily amounting to 13.67 million barrels for the month.

 

Since NNPC operates many of the oilfields in Nigeria in joint ventures with international oil majors, including Exxon, Chevron, Shell, and Eni, the Nigerian state oil firm is still negotiating the cuts with oil majors.

 

This is the reason the crude oil loading programme for June

and the official selling prices (OSPs) for May were delayed, a trading source said, according to report by Reuters.

 

 

According to other trading sources, Nigeria’s flagship, Bonny Light crude grade, has been recently offered at a discount of $5 a barrel to dated Brent, while it would have fetched a premium of $3 a barrel over Brent if market conditions were normal.

 

 

There are April and May cargoes of Nigerian oil that have not been sold yet, other sources say—a sign that demand is so depressed that no one wants even oil at $15 a barrel or less.

In these circumstances, Nigeria has no other choice but to cut its production.

 

 

“We have to cut down, whether with or without OPEC output cut deal. We have to reduce our oil production level because we do not have where to take the oil to, till the situation improves.

“The impact of the crisis is global and not on Nigeria alone,” Mele Kyari, Group Managing Director at NNPC, said.

 

 

 

 

 

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