Nigeria: Gov't Directs Oil Firms to Raise Output
AllAfrica.com, June 2, 2003 Posted to the web June 2, 2003 Mike Oduniyi Lagos
The Federal Government may have directed oil producing companies to raise output substantially up to Nigeria's capacity this month, in a bid to make up for the production losses to violence in the Niger Delta and the attendant revenue loss.
Nigeria's oil production had been reduced to around 1.9 million barrels per day (bpd) compared to its officially assigned quota of 2.018 million by the Organisation of Petroleum Exporting Countries (OPEC), since March this year when communal violence broke out in Warri, Delta State. Check out allAfrica's debate on the election in Nigeria. Click here.
While oil industry sources disclosed that they had been told to raise production to full capacity, the Department of Petroleum Resources (the nation's oil industry monitors) said at the weekend that companies with spare capacity had only been directed to make up for the losses from the violence-prone areas.
According to a senior DPR official, Nigeria has struggled to remain within her OPEC limit even though she was still running below the quota.
"We had a lot of crisis in May. As at Friday, we were still running slightly below our quota," said the official, adding, "what we do is to give additional quota to companies with spare capacity if a company can't meet up with quota."
OPEC meets on June 11, this year to review its new ceiling of 25.4 million bpd. Officials however, said that effectively, there was still no serious attachment to OPEC quota following the Middle East crisis while the effect of the Venezuela crisis was yet to wane on the market.
Nigeria has an installed production capacity of about 2.6 million bpd. Its new OPEC quota effective June 1, this year was 2.092 million. However, in the aftermath of the Warri crisis, industry officials said that about 300,000 bpd of crude production was still shut in by Shell, ChevronTexaco and Total, almost over two months ago.
In monetary terms, this translates into a daily loss of $6.6 million revenue, given the $22 per barrel official selling price for Nigeria's crude oil.
Furthermore, income from condensate production, (which does not fall under OPEC quota application) has been halted following the fire at ExxonMobil Oso Condensate production platform offshore Akwa Ibom, early last month.
Oil exports account for more than 90 percent of Nigeria's foreign exchange earnings. The Central Bank of Nigeria (CBN), said in its 2002 Annual Reports and Account that following a cut in Nigeria's OPEC quota last year, the country's total exports declined to 545.1 million barrels compared to 674.9 million barrels in 2001.
Consequently, revenue stood at N496.3 billion, declining by N438 billion when compared to 2001 earnings.
Meanwhile, the United States of America (USA) remained the largest importer of Nigeria's crude oil. The CBN report said the country's import accounted for 40.3 per cent of Nigeria's total oil exports last year.
Nigeria, according to the apex bank, exported 1.66 million barrels of oil daily last year, where the value of crude exported to Asia countries, which had been on the increase since 1999, dropped to N313.1 billion from N366.0 billion in 2001.
Export of crude to the Americas decreased to 278.5 million barrels valued at N842.2 billion, from 334.9 million barrels valued at N912.7 billion in 2001.
"Similarly, the volume and value of oil exports to western Europe also fell during the review year, totalling 121.0 million barrels valued at N369.2 billion compared with 154.4 million barrels worth N420.7 billion in 2001," said the CBN.