₦airaland Forum

Welcome, Guest: Join Nairaland / LOGIN! / Trending / Recent / New
Stats: 2,274,548 members, 4,984,405 topics. Date: Sunday, 16 June 2019 at 11:59 PM

Nigeria’s Oil Fields Face Shutdown Amid Price Slump - Business - Nairaland

Nairaland Forum / Nairaland / General / Business / Nigeria’s Oil Fields Face Shutdown Amid Price Slump (24579 Views)

OPEC Pegs Nigeria’s Oil Output At 1.8 Million Bpd / Britain To Invest In Nigeria’s Oil Pipelines, Others / Hard Times! Economic Downturn Humble Nigeria’s Oil Moguls And Super-rich (2) (3) (4)

(1) (2) (3) (4) (5) (Reply) (Go Down)

Nigeria’s Oil Fields Face Shutdown Amid Price Slump by bezimo(m): 6:55pm On Jan 18, 2016
Crude production cost almost equals selling price!!!!

This is an uncertain period for the Nigerian economy due to the continuing fall in the price of crude oil, the nation’s main revenue earner, and projections for the petroleum industry are indeed grim, ’FEMI ASU writes

With crude oil trading around $30 per barrel in the international market from a peak of $114 in June 2014, production from Nigeria now faces a decline as some fields face an imminent shutdown if the low oil price persists.

Industry players say operating some of the fields in the country is becoming uneconomic, with the selling price of oil being driven down close to the production cost level.

The price of the Nigerian crude oil, Bonny Light, has fallen to $29.47 per barrel, according to the latest data obtained from the Central Bank of Nigeria.

“When oil price drops, we are all in serious trouble, because if the oil price and your unit operating cost are almost the same, it means that when you sell the oil, there is little profit or you are at a loss. Many companies are not far from there,” the Project Director for the Uquo gas field development, a joint venture project by Frontier Oil Limited and Seven Energy, Alhaji Abdullahi Bukar, told our correspondent.

“The unit technical cost of many of our producers is not far from $30 per barrel. So many companies are in trouble,” he added.

According to Bukar, the average production cost for many of the fields in the country is $24 to $25 per barrel.

“For some fields, the production cost is well above $25, maybe $28. For some fields, it is well below $20 and $25. Many of the older fields, which are mostly with the International Oil Companies, have got high production costs,” he said.

Global financial services firm, Morgan Stanley, on Monday joined banks such as Goldman Sachs, City Group and Bank of America Merrill Lynch, in warning that prices could slide to $20 per barrel.

Bukar said, “The production in Nigeria is going to suffer. In the last five years, we have not invested as much as we should to develop additional reserves. Once, we keep going like that, whether there is price change or not, the amount of oil Nigeria is going to be producing will go down.

When the price drops as low as $20-$30 range, people who have got those old fields or fields where oil production cost is above the selling price will shut them down. There is no point in producing oil to sell at a loss.”

Nigeria, Africa’s top oil producer, relies on crude oil for most of its export earnings and government revenue. Oil production in the country has continued to hover between 1.9 million barrels per day and 2.3 million bpd in recent years.

President Muhammadu Buhari had projected crude oil production of 2.2 million bpd for this year’s budget, down from 2.2782 million bpd in the 2015 budget, with oil-related revenues expected to contribute N820bn.

Industry experts also say the continued decline in global oil prices would stall a number of deep-water projects in the country

An energy expert and Technical Director, Drilling Services, Template Design Limited, Mr. Bala Zakka, said with oil at $30 per barrel, the profits and projects, including Corporate Social Responsibility activities of many oil firms would be negatively affected.

“Major deep-water projects will be affected because they are very expensive. If oil continues to fall, a lot of exploration and drilling campaigns will reduce. A lot of marginal field operators will not be able to drill new wells. There is every possibility that companies will retrench to be able to stay afloat,” he said.

The Head, Energy Research, Ecobank Capital, Mr. Dolapo Oni, said, “Our production is really having issues, and I think it might be worse in 2016. Our production is likely to reduce this year.

“There are not as many fields likely to come on stream this year. Most companies just want to focus on their existing production. So, it is possible we won’t see as much new production come on stream to reverse the trend of decline in major fields we have. That might make production go down.”

Oil prices could reach as low as $10, Standard Chartered warned, stating, “Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the dollar and equity markets.”

Wood Mackenzie, the energy consultancy firm, said in a report last week that since the oil price collapse in 2014, 68 major upstream projects containing 27 billion barrels of oil equivalent had been deferred.

This, it said, amounted to $380bn of capital expenditure deferred by total project spend in real terms.
High cost deep-water fields, particularly those in Angola, Nigeria and the Gulf of Mexico, requiring heavy upfront investment, account for more than half of that deferred production.
Source:http://www.punchng.com/nigerias-oil-fields-face-shutdown-amid-price-slump/

6 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by emamos: 6:59pm On Jan 18, 2016
It is well

7 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Pressidoo: 7:01pm On Jan 18, 2016
When you need the mods you'll not see them, but if it's a trashy picture of a guy looking like davido & co, they'll push it to front page.

64 Likes 3 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by bezimo(m): 7:04pm On Jan 18, 2016
This is because economic sanctions have been lifted on Iran, the reality here is that they flood the market with millions of barrels of crude oil which has been in their reserves for long, creating a supply glut. This pushes the price to further lower levels possibly eventually $10 per barrel.
http://www.thisdaylive.com/articles/nigeria-faces-further-revenue-slump-as-iran-returns-to-oil-market/230652/#.Vp0SUA4DfbY.facebook

The implication is that all oil export dependent economies are affected negatively from Canada to Russia to Venezuela to Nigeria to Saudi Arabia to Angola. " Lo ba tan. It is finiseee".

Time for Buhari to remove his eyes from oil in the ND and diversify the economy urgently or encourage true fiscal federalism.

55 Likes 9 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Pavore9: 8:21pm On Jan 18, 2016
lt mean owning an oil bloc is no longer lucrative.

13 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by ShowYourCertificate: 8:27pm On Jan 18, 2016
Pavore9:
lt mean owning an oil bloc is no longer lucrative.
Yes. It also means our clueless Buhari should stop wasting our money searching for crude oil in Lake Chad. This is the time Buhari needs to sharpen his economics skills. Maybe he can enroll for O'Level Economics in this oncoming WASSCE grin

123 Likes 12 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Nobody: 9:01pm On Jan 18, 2016
i smell endtime.

11 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by bezimo(m): 9:14pm On Jan 18, 2016
Pavore9:
lt mean owning an oil bloc is no longer lucrative.

From a business perspective this might be the best time to buy off oil blocs at low prices from owners because oil exploration and production is no longer lucrative for now but we cant say for the future.

14 Likes 2 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Singapore1(m): 9:29pm On Jan 18, 2016
i dont even trust USA a bit
lemme think....

5 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by kennyman2000(m): 9:58pm On Jan 18, 2016
Hmmmmm.... Dangote could play with his money this time and buy off oil wells from broke and hungry politicians who wants to sell..


Check my signature for ur customised wristband

3 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by aloeman15(m): 12:35am On Jan 19, 2016
1. Reduced crude prices
2. Reduced crude sales
3. Reduced naira value
4. Subsidized petrol imports
5. Import dependent economy
6. Massive welfare programs
7. Dissonant arms of govt

... So where is money for the 2016 budget coming from? And what is the govt's economic plan of action?
Oh, just a heads up- the fight against corruption has failed.
It was unavoidable really. Pursuing a few people while the rest of the nation continues 'business as usual' was destined to yield little fruit.
Especially since you still haven't jailed a single person...

36 Likes 5 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Bevista: 4:37am On Jan 19, 2016
According to Bukar, the average production cost for many of the fields in the country is $24 to $25 per barrel.
Meaning that, if oil price averages $30 in 2016, Nigeria will earn a profit of around $5pb instead of the expected $13pb (based on budget benchmark of $38).
---
This will reduce crude oil revenue from ~880bn to ~N400bn. The low oil price will also have contagion effect on other forms of Tax revenue. Basically, $30 oil price might knock off ~N700bn - ~1tn revenue from the 2016 budget. The worst impact will be felt by state governments who depend largely on FAAC with little or no IGR. Lagos state will, surely, be the most resilient of all states, while the likes of Osun and Ekiti will, practically, declare bankruptcy.
---
Lower oil prices will benefit the Saudis the most since their average production cost is around $12. Coupled with Foreign Reserves in excess of $750bn, they can comfortably ride oil price below $20, driving other players out of the market and increasing their market share before prices rise again.

29 Likes 2 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by ojoyentalk: 5:37am On Jan 19, 2016
OPEC,please do something fast
Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by bezimo(m): 7:03am On Jan 19, 2016
If OPEC members can corporate and reduce production by 40% or say 35% or a little less, supply would reduce and the oil price would go up, but no member wants to lose its market share.So the situation continues.
Or alternatively if there is crisis in the middle east, the oil prices could bounce back but what would trigger the crisis?

10 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Nobody: 7:27am On Jan 19, 2016
bezimo:
If OPEC members can corporate and reduce production by 40% or say 35% or a little less, supply would reduce and the oil price would go up, but no member wants to lose its market share.So the situation continues.
Or Alternatively if there is crisis in the middle east, the oil prices could bounce back but what would trigger the crisis?
how about the crisis buhari is creating in the SE and SS will that help the oil industry?

20 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by BLWeb: 7:37am On Jan 19, 2016
bezimo:

Time for Buhari to remove his eyes from oil in the ND and diversify the economy urgently or encourage true fiscal federalism.

I agree with you but doing this is going to be in the long term. What i suggest the FG does quickly is to build human resource capacities. Invest heavily in building small businesses and give out loans with zero interest and grants for small businesses to start local production and manufacturing what we need, and also the FG should declare an emergency on agriculture, encourage the youths to go into farming, the positive effect will be a cushion to battle austerity in the long term.

What will work faster is encouraging youths who are starting out as entrepreneurs and give them room to shine, in turn they will train others and the circle keeps on going till the only word we hear is small businesses and entrepreneurship.

24 Likes 2 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by BLWeb: 7:41am On Jan 19, 2016
ShowYourCertificate:
Yes. It also means our clueless Buhari should stop wasting our money searching for crude oil in Lake Chad. This is the time Buhari needs to sharpen his economics skills. Maybe he can enroll for O'Level Economics in this oncoming WASSCE grin

Stop placing all the woes on Buhari like the keys of the economy is in his hands. We all have a role to play, lets start from ourselves.

16 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by tempest01(m): 8:04am On Jan 19, 2016
The problem now is if you cut supply, another country wins your market. And that doesn't drive the price up since there was an oversupply.



It would have been better if our refineries were working and we were am exporter of refined products, we would have refined locally for our consumption, and exported for forex

8 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by AceRoyal: 8:32am On Jan 19, 2016
Propaganda,partisan politics and un-necessarilly playing to the gallery with the shouting of fighting corruption and media trial can't solve this.
This is going to be the true test of governance for this administration.
This is the perfect opportunity for them to test their skills.
After all a true general is made in battle and his skills sharpened in difficult situations,not just by rank.
This government has to do more in unifying every aggrieved party of the country for us to pull through this.

11 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by hobermener: 8:32am On Jan 19, 2016
With sanctions lifted, iran is ready to hit the market with a deluge of barrels of cheap oil. As at today, gas sells for less that a dollar in some states in the us. I honestly think the worst recession in decades is about to hit Nigeria at the moment, a consequence of over reliance on oil, an being content with a mono economy, while embezzlement, and gross misappropriation of funds thrive unabated. I see party faithfuls already hurling invectives at each other across both sides of the divide, and some resorting to blame games, but our current economic woes were brought upon us by successive generation of selfish leaders, whose uncontrolled penchant for amassing wealth takes preeminence over and above the welfare of the masses.

29 Likes 4 Shares

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by anigbajumo(m): 8:32am On Jan 19, 2016
This country is presently in deep poo,if care is not taken Nigeria Economy is on the verge of cracking down.
This is the time PMB should stop touring the world and work with his team to make positive impact on time.
If am not wrong I think oil represent 13.7% in 2016 budget at 38$ per barrel, now in January is below 30$ per barrel,(100% wrong speculation).

Fiscal federalism is one of the best solution now if we want to help our Economy and diversification of our revenue totally from oil.
Last time I checked, this country is well blessed than eyeing oil alone. We have many mineral resources that can generate huge revenue if it is properly managed.

6 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by eleojo23: 8:33am On Jan 19, 2016
This news is both good and bad.

2 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Sijo01(f): 8:33am On Jan 19, 2016
Oh, oyel, you've finally crumbled!
Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by ksstroud: 8:33am On Jan 19, 2016
IT IS WELL
Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Smartsyn(m): 8:33am On Jan 19, 2016
Wahala dey oo

Anybody that will want to sell his bloc should contact me ASAP, ie if you'll sell 1million spread over a period of 10years..
Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by mcfynest(m): 8:34am On Jan 19, 2016
Give your life to Christ before it is too late.... These recesaion was predicted in the bible.....we hope and pray that when the time comes, the Lord will meet us doing good.



Guys.. $$$ z increasing,more money for freelancers

7 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by nasty45(m): 8:34am On Jan 19, 2016
Soon $1 = N500
The Arab nation saw this coming and they diversified but my stup1d cUntry men used our common wealth to stock their account and that of their relatives... Hate this cUntry mehn

16 Likes 1 Share

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by Firefire(m): 8:35am On Jan 19, 2016
Wonderful!

1 Like

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by kennyman2000(m): 8:35am On Jan 19, 2016
Hmmmm....
Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by NoreenUG(f): 8:35am On Jan 19, 2016
Osun civil servants don hear am be dat.

8 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by seunspet(m): 8:35am On Jan 19, 2016
bezimo:
This is because economic sanctions have been lifted on Iran, the reality here is that they flood the market with millions of barrels of crude oil which has been in their reserves for long, creating a supply glut. This pushes the price to further lower levels possibly eventually

The implication is that all oil export dependent economies are affected negatively from Canada to Russia to Venezuela to Nigeria to Saudi Arabia to Angola. " Lo ba tan. It is finiseee".

Time for Buhari to remove his eyes from oil in the ND and diversify the economy urgently or encourage true fiscal federalism.
you are right my bro

3 Likes

Re: Nigeria’s Oil Fields Face Shutdown Amid Price Slump by emerged01(m): 8:36am On Jan 19, 2016
Yoruba man will say"haaaaaaaaaa!!!!!!"

1 Like 1 Share

(1) (2) (3) (4) (5) (Reply)

Ecrestglobal E-currency Exchange Customer Support / Affiliate Marketing: They Are Taking Advantage Of Multi-billion Dollar Industry / Ecobank Wants Court To Declare Oba Otudeko Bankrupt Over Indebtedness

(Go Up)

Sections: politics (1) business autos (1) jobs (1) career education (1) romance computers phones travel sports fashion health
religion celebs tv-movies music-radio literature webmasters programming techmarket

Links: (0) (1) (2) (3) (4) (5) (6) (7) (8) (9)

Nairaland - Copyright © 2005 - 2019 Oluwaseun Osewa. All rights reserved. See How To Advertise. 144
Disclaimer: Every Nairaland member is solely responsible for anything that he/she posts or uploads on Nairaland.