Abdulfattah Olajide and Yunus Abdulhamid
21 November 2008
The world's national oil companies have predicted a further fall in international crude oil prices to as low as $40 per barrel in the days ahead, suggesting that the $45 per barrel crude oil benchmark proposed for the 2009 budget by the Federal Government may be unrealistic.
A meeting of the national oil companies in Beijing last October had predicated oil prices would fall to about $40 a barrel soon, the Chief Executive of China National Offshore Oil Corporation, Mr. Fu Chenghu told a conference held in Barcelona, Spain on Monday. According to a Financial Times report, the Chinese oil chief said the world's national oil companies would have to cancel most planned investment projects even with the current international price of crude oil.
Oil price in the international market went further down to $48 per barrel yesterday as the world's financial meltdown bit harder on developed and developing economies. Mr. Fu said the consensus at the October meeting of national oil companies "was that everybody realised the oil price would be even lower, nobody knew where it would be, but most of them said around N40". He said about 27 companies from 23 countries attended the meeting in Beijing, describing the tone of the meeting as one of "panic" at falling prices.
"If the oil price remained around $50 or $55, that would mean cutting at least 60 per cent of budgeted projects for the next one or two years from the national oil companies. When most of the oil companies budgeted their projects, they were using $70, $80, even $100 a barrel for their cash flow calculations. For those projects that have started, certainly they will try to complete them, but for those projects that have not started yet they will delay or cancel. Simply, they don't have enough cash to do all of those that they budgeted", Mr Fu said. In Nigeria, the governors of the 36 states of the federation had earlier demanded that the oil benchmark for 2009 be raised to $50, citing the need to provide adequate funding for state infrastr-uctural projects.
They however jettisoned their demand earlier this week and accepted the Federal Government's proposal of $45 per barrel after last Tuesday's National Economic Council (NEC) meeting. According to Governor Bukola Saraki who spoke on their behalf, they dropped their demand after the Governor of the Central Bank of Nigeria, (CBN); Professor Charles Soludo explained the dynamics of the oil sector to them and allayed their fears on the $45 oil benchmark.
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