Onyebuchi Ezigbo
19 April 2006
Abuja — Minister of State for Petroleum Resources and the current Pre-sident of the Oil Pro-ducing and Exporting Co-untries (OPEC), Dr. Edmund Daukoru, yesterday described the upsurge in the international market price of crude oil as a good omen for member countries.
Speaking at a Ministerial Press Briefing on the activities of his ministry, Daukoru said the rise in oil price should not be seen as something extra-ordinary but that the situation should be interpreted in the context of the changing global economic trends which presently promotes rising product prices.
He said the price rise is justifiable when juxtaposed with the increases in global GDP of most other countries of the world.
"If it is related to the global GDP growth, I will consider that, a very healthy development. Nothing is static, it the balance between the GDP growth and product quantity, oil not excluded. Currently most other products such as gold, coal, aluminum are out of the roof and oil should not be an exception", he said.
At the same time, he said the global GDP rate is growing at the rate of 1.5 per cent and with the huge demands from China, we are going to be seeing very, very robust prices in the future.
Crude oil prices closed on Monday at an all time high of $71 per barrel on fears of declining supply to the international market.
The minister said there is a long term constraint in the downstream capacities around the world which is not going to give way in the near future while there is spare capacity in the upstream sector which exists for perception purposes.
Technically speaking, according to him, there is enough spare capacity in the upstream. For instance, he said, during the Hurricane Katrina, the IEA offered a lot of volume of oil but it was not taken up while OPEC pledged to put additional 2million barrels per day but the market did not absorb that, so the refinery capacity is not just there to take the additional volumes", he said.
He said whatever OPEC is doing in terms of spare capacity is largely for sake of perception, so that the market sees and knows that in case of shortfall in one or two producing areas other areas has enough to cover.
"It is also because of the spread of that perception that the guarantee is not there that should something happens to a member there is not enough capacity to fill the gap", he said.
Making particular reference to the recent hike in oil prices, Daukoru attributed the development to the crisis of confidence involving Iran and the international community over its nuclear programme.
"In my own understanding, the current spike in international oil price is as a result of the tension associated with Iranian nuclear development programme which has been fueled by the renewed Isreali-Palestine conflict in the Middle East. The shoot-up in price is caused by mainly the threatening statements by some world leaders against Iran because of its nuclear deployment programme", he said.
He added that the situation is also not helped by the flare up in the conflict between Israel and Palestine and "as soon as these hot words ceases, the situation is bound to stabilise."
Commenting on the position of output in the domestic scene, Daukoru said the disruption caused by the Militant action has resulted in the loss of close to 500,000bpd of crude oil.
Although efforts are in top gear to recover most of these lost volumes, we are still a long way from making up for the lost oil volumes resulting from the crisis in the Niger Delta put at about 500,000bpd" he said.
He said the country is so fortunate that the price increases being witnessed in the international market was just enough to offset the loss in oil volume resulting from the crisis in the Niger Delta area and as such is able to match budgetary estimates.
But the situation has made it impossible for government to put aside funds in the account meant for excess crude prices.
At yesterdays meeting of the Niger Delta Socio-economic development at the Presidential Villa, the Minister said the youths representatives gave a guarantee to the President that they would allow access to pipelines.
"The youths yesterday afternoon gave their word that they are going to cooperate with government and allow access to pipelines and I would want to believe that they meant every word their promise on the matter. With this I do believe that there would access to these facilities in the next few days", he said.
Currently Erha which is doing between 70,000 - 80,000 bpd has come in handy to help the country recover some of its lost capacities, he said. Daukoru said FG is on the verge of concluding action on the oil and gas reforms .
He said the reform proposes to have in place the national petroleum directorate, Petro-leum Inspectorate Commission (PIC), National Oil Company (NOC), Petroleum Products Distribution Authority (PPPDA) and National Petroleum Research Centre (NPRC).
Answering questions on the continued delay in fixing the pipeline facility that supplies gas to power plants across the country, Group Managing Director of NNPC, Engr. Funsho Kupolokun said contract has been awarded for the repair of the damaged gas pipeline infrastructure in the creeks but that the contractor was not able to mobilize to site due to fear of insecurity.
He said following the assurances by the youths at the meeting with the presidency yesterday, the contractor has been asked to move to site and commence the repair work.
Kupolokun also said the crisis has affected the capacity of the refineries from 70 - 40 per cent and has led to the increase in product import as against the reduction recorded just before the resurgence of militant's activities.
He said before the crisis, the nation has achieved a reduction from 73 cargoes to about 30 cargoes of PMS import but that this has been reversed, adding that presently the corporation imports close to 70 cargoes of Products for domestic consumption.
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