Owing to a further slide in prices and additional shut-in of about 35,000bpd in Usan and Yoho Terminals, Nigeria’s export earnings in 2015 from the sale of crude oil declined by 50 per cent.
Other factors responsible for the shortfall in earnings, according to the Nigerian National Petroleum Corporation (NNPC), include the non- receipt of Nigeria Liquefied Natural Gas (NLNG) feedstock of about $74.47 million following payment slippage into new year and 57.08 per cent drop in liquefied petroleum gas/natural gas liquids lifting.
The countryís major export destinations are now Germany, France, Italy, Spain, Sweden, Brazil, India, Indonesia, South Africa, Cameroun and others.
In a related development, there are indications that crude oil production cost may not have favoured offshore activities after all, with the plummeting fortunes of the commodityís price in the world market.
With the price of Organisation of Petroleum Exporting Countries (OPEC) basket of 13 crudes at $29.90 a barrel, as at Friday, Nigeriaís deep water oil water operators are expending over $32 to produce a barrel of the countryís grade of crude oil, while the onshore producers are producing at $20 a barrel.
Total export crude oil and gas receipt from January to December 2015 is $4.74 billion out of which $0.61billion was remitted to the Federation Account while the balance of $4.13 billion was used to fund the Joint Venture Cash Call for the period. The corporation paid N1.095 trillion to the Federal Accounts Allocation Committee (FAAC) from January to December 2015.
The NNPC which made this disclosure in its financial report released at the weekend said that JV funding had taken more than 87 per cent of the gas and crude oil proceeds. JV cash call is a first line charge to the Federation Account and 2015 Approved Budget requires monthly funding of about $615.8 million.
The corporation noted that it was therefore mandated to sweep all the export receipts to JV Cash Call funding, implying a zero remittance to the Federation Account.
It explained: ìKey constraint to Nigerian upstream sector has been under-funding, which prompted the use of debt to finance essential projects aimed at arresting production decline and grow producible reserves. Conventional oil and gas fields typically have average decline rates of 10 per cent to 20 per cent per year, which requires a serious step up in investment in infrastructure and production facilities to maintain production plateau or to grow production .
In this regard, NNPC recently kick -started the process of selecting financial advisors for alternative financing initiative aimed at bridging the current upstream JV funding gap, growing NPDC production and establishing energy investment fund for downstream infrastructure development.î
The corporation stressed the need to carry out a holistic reform of the refineries in order to put the assets back on the track of profitability.
It noted that a 90-day programme was going on to reassess the refineries.
ìRefinery capacity below commercial threshold due to prolong Turn Around Maintenance (TAM) issues and pipeline vandalism and products losses have continued to cost NNPC a huge amount of money. A comprehensive reform of the pipeline security situation will unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, improved refinery utilisation due to increased crude oil feed from restored pipelines, and reduction of crude/product losses. A total of 2,832vandalised points have been recorded between January and December2015, resulting in a total loss of ¶ 59.71billion for crude and products , it added.
A source at the NNPC told The Guardian in confidence yesterday that the country s offshore crude oil producers were actually paying as high as $32 a barrel, while the on-shore operators are paying $26 a barrel.
Though the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said that the country would still be making profit even if the price of crude oil dropped to $20 a barrel, latest information obtained by The Guardian, showed that the onshore producers were only gaining $5 and $10 per barrel of oil produced while the deep water producers were actually recording losses.
According to international energy statistics by Rystad Energy, the United Kingdom pays $52.50 to produce a barrel of oil; Canada, $41; Brazil, $48.80; the United States, $30.20. Angola is not also spared as it pays $36.40 to produce a barrel of oil.
The total cost of producing crude oil includes all of the costs from project site plan development to lifting oil from the well.
The United Arab Emirates, Iraq and Saudi Arabia seem to be the only countries making profit as they all produce at less than $10 and N15 per barrel.
Though the OPEC had envisaged over $10 trillion investment in the sector between now and 2040, it believed that the environment was putting the future at risk. ìAt current price levels, it is clear that not all of the necessary future investment is viableî, it said.
Already, many oil and gas companies have started reducing capital spending due to uncertainties in oil prices. For instance, Royal Dutch Shell Chief Executive Officer, Ben van Beurden said in the companyís fourth quarter 2015 update made available to The Guardian, that it was taking impactful steps to refocus and reduce capital spending.
