Leadership (Abuja)
Aminu Imam
21 November 2008
Abuja — Nigeria's crude oil export has suffered another major setback as the soon-to-expire-month crude contract hit yet another 22-month intra-day low as energy prices continued to fall on the New York futures market amid persistent signs of a weakening economy.
The price of Organization of Petroleum Exporting Countries (OPEC) basket of thirteen crudes stood at 45.89 dollars a barrel on Wednesday, compared with $46.55 the previous day, according to OPEC Secretariat calculations.
"Crude continues to fall as economic weakness and softer demand are expected to more than offset supply cuts by OPEC", said analysts. They also noted that United States oil major Chevron Corp. on Nov. 18 declared a force majeure through year-end in Nigeria after a main supply pipeline was sabotaged last week, forcing the shut-in of 90,000 barrels per day (bpd) of crude.
Chevron on Wednesday declared a force majeure on its Escravos crude oil exports, until the end of the year, due to last Friday's militant attack on its pipeline.
Suspected militants had in June blown up the Abiteye-Olero crude pipeline, forcing Chevron to cut around 120,000 bpd for nearly a month.
The production shut-in, cut into the country's quota and the falling oil prices have delayed the presentation of the 2009 Appropriation Bill by President Umaru Musa Yar'Adua to the National Assembly.
President Yar'Adua had blamed the delay on the global economic crunch which affected the oil price benchmark on which the appropriation was initially predicated.
The 2009 budget was initially predicated on $62.5 oil price benchmark. It has now been brought down to $45.
OPEC is also worried by the worsening world economy and the falling oil price, which had wiped close to $700 billion from its coffers, OPEC President Chakib Khelil was quoted as saying on Wednesday.
Oil ministers from the Organization of Petroleum Exporting Countries gather for informal talks on a further oil supply cut in Cairo on November 29 and are scheduled to meet again on December 17 in Oran, Algeria.
"All members ... are very concerned about the economic situation which has worsened in the United States and Europe which has entered recession, followed by Japan," Khelil was quoted as saying in El Khabar newspaper.
Khelil, as well as OPEC members Kuwait, Iran, Venezuela and Ecuador, has said OPEC could cut supply further in coming weeks. An OPEC delegate said the group needed to lower output by a further 1.5 million bpd.
Data on OPEC members' compliance with an October 24 decision to cut supply would enable the group to decide how to correct a situation that had led to losses to members of $700 billion, Khelil, also Algeria's oil minister, told the newspaper.
OPEC agreed in October to cut supply by 1.5 million bpd, about 5 percent, from November1, but the deal had yet to stop oil prices falling. Crude has slumped to below $50 a barrel from a record $147.27 four months ago.
Minister of State for Energy (Petroleum), Odein Ajumogobia, said on Wednesday that Nigeria was not pushing for a further OPEC production cut but the meeting in Cairo would consider that option.
"It is a consultative meeting, it is just for members to compare notes, look at our budgetary requirements for the year, look at the price, look at supply and demand scenarios and look at what options we have," he told Reuters.
"The obvious option if the prices continue to fall, and assuming also that the prices are falling as a result of constrained demand, then it's to take further production out."
Hopes that the falling crude oil prices would lead to cheaper petroleum products in Nigeria have been dashed by the Federal Government as the Federal Executive Council (FEC) at the end of its weekly meeting yesterday foreclosed any pump price reduction.
Mr Odein Ajumogobia, while briefing State House Correspondents, said the inability of the government to opt for a reduction in the domestic prices of petroleum products is because the sector is not deregulated.
Last May, Ajumogobia had, while making a case for the removal of subsidy, put the total projected cost of subsidy for 2008 at about N700 billion when crude oil was selling for over $100.
"We are trying to be more systematic and thorough in handling the subsidy issue. We cannot sustain it. We believe that we must go through deregulation of the price. We are engaging the stakeholders work with us. The N700 billion subsidy is over N100 billion above this year's capital vote," he had said.
However, he did not say if the subsidy bill would still be as high with crude oil now selling below $50.
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