Abuja — The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said that the current fluctuations in oil prices pose no immediate threat to Nigeria's economic recovery, even as oil prices on Wednesday inched up for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting that OPEC cuts could create a crude deficit in the first half of 2017.
Brent futures gained 89 cents, or 1.8 per cent to settle at $51.81 a barrel, their first increase in seven days. The global benchmark on Tuesday fell to its lowest level since November 30.
Kachikwu, who spoke on Arise News Network, the sister broadcast arm of THISDAY, said it would amount to being an alarmist to consider the gyrations in the oil market a threat to the Nigerian economy, adding that Nigeria still sells most of its crude oil blends well above $50 per barrel.
The minister also stated that member countries of OPEC were alert to the current price movements and the resurgence of shale oil production, explaining that they would react to the changes as required.
He explained that members of OPEC were already exploring opportunities to engage U.S. oil producers on efforts to stabilise prices, adding that he was optimistic the U.S. would soon join OPEC and non-OPEC members to sustain existing efforts on this.
"I wouldn't be that alarmist frankly. We are still in the $50 range. In fact, some of our key product components are selling above $50 per barrel," Kachikwu said, explaining: "Forcados is about $52, Bonny Light is about $51.5, so we are over and above the $50 threshold."
The minister also stated that Nigeria's crude oil production was down to 1.7 million barrels a day (mbpd) following scheduled maintenance works by Shell and ExxonMobil, and that importation of petrol into the country was exerting about 40 per cent foreign exchange pressure on the economy.
Kachikwu said: "We have always projected that given the incentive that higher prices create for shale producers, it will see a spurn reaction, and let's face it, the Trump presidency era creates a lot of incentives for people to go back into shale production.
"We've always anticipated that and we knew we were going to flip-flop in the $50 range.
"I expect as the winter season gets towards the end and a lot more consumption begins for those who do summer holidays, you are going to see movements in all that.
"My projection is that we still will end the year on an average of $54, $55 per barrel, that is one of the things OPEC is focused.
"Bear in mind that Saudi Arabia and all the other producers in OPEC have always said that as we watch those numbers build, there is a need to take more drastic actions, and I think that is something we are taking very seriously.
"Over and above that, continuous engagements continue with the likes of Russia, Mexico and the rest, and we are even beginning to look for windows of talking to the United States because it is in the long-term interest of everybody that there is stability in the price of oil.
"Bear in mind that the infrastructure for oil production is coming out of the U.S. This doesn't just impact nations like Nigeria, it also impacts nations with a huge technological input base into oil production.
"A lot of American oil companies are caught right in the web of this and their survival depends on the stability of this market.
"So, sooner or later, just like Russia did came on board, I am one of those who are optimistic that America will come on board."
He stated that while U.S. shale oil was still a challenge to OPEC members, their low production costs was still an advantage, adding that OPEC members could leverage on this to hold on to a comfortable market share.
"I've been able to get everybody interested in maintaining some stability in oil price and so it is not a clobbering issue, it is work in progress, it is taking each season at a time and seeing what develops and at some point.
"Even the shale producers are going to realise this, just like what happened the last time - that the further the price drops, the lesser the ability to survive as a business entity.
"So I think that these things will even out. The first salvos were fired by OPEC in the first cuts; there probably would be some more cuts that would follow both between OPEC and non-OPEC.
"But more important, as I keep saying is that at the end of the day, the least cost producer are still the OPEC members and that is what we are pushing aside.
"As we focus on the price increasing, the more critical thing that OPEC countries must begin to focus on is how they will ensure that costs remain the least, and that is where countries like Nigeria are challenged and we need to do a lot more work in this, and we are working on that," he said.
The minister also spoke on the government's mediation efforts in the Niger Delta, the country's oil production level and the refinery rehabilitation programme, amongst others.
On oil production, he said: "As of yesterday, we dropped because Shell (Bonga field) for example has closed down for maintenance and that has taken about 200,000 barrels.
"Exxon is also doing some turnaround maintenance that is going to last about 30 days, those are non-violence related shutdowns and certainly would have been made easier if Forcados was back on stream.
"So now we are down to about 1.65-1.7 million barrels per day as of yesterday."
On the refineries operated by the Nigerian National Petroleum Corporation (NNPC), the minister disclosed that the plants are producing some 7 million litres per day and have "come back from where we met them, almost comatose".
According to him, "It takes almost 12 months to turnaround the refineries once you have the financing and model. We have set that target, we really don't have an option, I've set that target for the ministry and if we don't do that we will collapse because the 35 to 40 per cent exchange rate burden by virtue of importation of petroleum products shouldn't be. Sending out crude with all the uncertainties in terms of price movement is a killer.
"So, we really don't have an option, we have to work night and day to try and accomplish this."
He said as part of the government's plan for the Niger Delta, it might allocate the state governments in the region some marginal fields, but with the discretion of President Muhammadu Buhari.
He also said the government did not pay any money to militants in the Niger Delta to buy the prevailing calm in the region, but was concentrating on long-term solutions as against short-term gains.