OPEC Considering Deeper Output Cuts To Prop Up Oil Prices

By Mohammed Shosanya

Lagos – Plan by the Federal Government to fix Nigeria’s ailing refineries and make them work to capacity has been shut down by Maikanti Baru, Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Daily Independent has learnt.

NNPC sources said the plan informed Minister of State for Petroleum Resources, Ibe Kachikwu’s optimism last year that he will resign if Nigeria continues to import fuel by 2019 thinking the plan would be followed through. He had since shifted the country attaining self-sufficiency in terms of refining petroleum products to 2020.

Impeccable sources told Daily Independent that the government had embarked on private public partnership (PPP) arrangement to bring back the ailing facilities to life.

It had concluded agreement with Oando, an indigenous energy company operating in the upstream, midstream and downstream; global commodities trader, Trafigura and world’s largest oil trader, Vitol, to rehabilitate Port Harcourt refineries with installed capacity of 110,000bpsd.

The sources also said the government was to hand over Warri Refinery and Petrochemical Company (WRPC) with installed capacity of 125,000bpsd to Sahara Energy, a subsidiary of a leading international energy and infrastructure conglomerate; Italy’s Saipem, MRS Oil Nigeria Plc and Vitol to refurbish.

It also concluded arrangement to hand over Kaduna Refining & Petrochemical Company Ltd. to MRS Oil Nigeria Plc and Vitol.

The source said Vitol and other firms guaranteed to inject fund in all the refineries with installed capacity of 445,000bpd, noting that the rehabilitation will cost $1.6 billion.

The PPP talk which had been on for over a year was to see the oil firms recoup their investment after repairs of the refineries from sales of crude oil, the sources said.

Spokesman of the corporation, Ndu Ughamadu, didn’t respond to calls and text messages to his phone for NNPC’s reaction.

Several billions of dollars have been sunk by successive administrations in the country to bring the refineries to life without any fruition.

President Muhammadu Buhari had earlier said it was “disgraceful” that no refinery is currently performing up to 50 percent installed capacity, adding that when he was military head of state all refineries were working.

But stakeholders in the nation’s oil and gas sector who spoke with Daily Independent berated the Federal Government over the botched maintenance of the refineries, saying the government had not shown the requisite political will to make the refineries work optimally despite its promises.

They also said that the fact that the incumbent government makes provision for fuel subsidies in 2019 budget shows that the much publicised efforts to bring back the ailing refineries and stop the deluge of products importation was a fluke.

Nnimmo Bassey, environmentalist and oil expert, told Daily Independent that turn around maintenance for refineries in Nigeria has become a huge sinkhole.

He also said it is a huge embarrassment that rather than having the refineries working at full capacity Nigeria is spending astronomical amounts on fuel subsidies.

“And more disturbing is the fact that the 2019 national budget has a huge slice for more subsidies. Government should carry out a radical surgery of the malaise of the refineries and excise the cancer decisively. Dancing around the matter will continue to benefit the so-called cabal while the productive areas of the economy suffer,” he added.

Chief Martin Onovo, a petroleum engineer and one-time presidential aspirant on the platform of the National Conscience Party (NCP), regretted that the current administration made rehabilitation of the refineries and stopping of importation of petroleum products one of its cardinal campaign promises but failed to bring same to fruition.

He said the current government has no business tossing Nigerians around on the status of the refineries when it knows that it would take a long walk to put the assets in good shape and it lacks the capacity to ensure it runs efficiently.

Onovo told Daily Independent that the failure of the Buhari’s administration to evolve aggressive strategy to promote or encourage in-country refining of product has eaten deep into the country’s revenue and exposes the government as agent of lies and deceit.

He added that Nigerians should hold the incumbent administration by the jugular for failure to appropriate substantial funds of the N25.6 trillion accrued to it since 2015 to breathe life into the refineries.

OPEC Considering Deeper Output Cuts To Prop Up Oil Prices

Meanwhile, faced with declining prices and growing inventory in the international oil market, the Organisation of Petroleum Exporting Countries (OPEC) and its allies are considering deeper output cuts to prop up oil prices.

The determined move by OPEC is coming when it had not even started implementing its new six-month agreement to cut output to 1.2 million barrels per day.

The planned deep cuts would specifically be beneficial to Nigeria which depends on oil for over 80 percent of revenues to fund its budgets.

Already members responsible for most of the reductions have pledged to extend or even deepen it.

Officials from Iraq, Kuwait, and the United Arab Emirates have agreed with Saudi Arabia’s expectation that the group, along with Russia and other oil producers, would extend the agreement for another six months.

At a press briefing in Kuwait at the weekend, Iraqi, the U.A.E. and Algerian energy ministers took turns repeating the message that OPEC would deliver its 800,000 barrels per day cut and continue their cooperation with other producers to balance supply and demand.

The U.A.E.’s energy minister, while stressing that the 1.2-million barrel-a-day cut will clear an inventory build-up in the first half, hinted additional curbs could be discussed.

“The planned cuts have been carefully studied, but if it doesn’t work, we always have the option to hold an extraordinary OPEC meeting and we have done so in the past,” Suhail Mohammed Al Mazrouei, who is also OPEC president, said in Kuwait at the weekend.

“If we are required to extend for another six months, we will, if it requires more, we’ll always discuss and come up with the right balance.”

Last week, oil capped its biggest weekly decline since 2016 on concerns that weakening economic growth and surging U.S. supply will lead to a surplus next year, overwhelming OPEC’s efforts to stabilize the market.

The slide continued even after the Organization of Petroleum Exporting Countries and its partners surprised traders with the size of the supply reduction announced on Dec. 7.

Source:- Independentng