More Troubles for Nigeria as OPEC Oil Freeze Deal Fails
By Daniel Adugbo
Nigeria Daily Trust
Apr 24 2016 5:00AM
Last week, a meeting between the world’s biggest oil producers ended without a deal to freeze production. The failure of the deal, which could have hastened a recovery in oil prices, puts Nigeria and other cash-strapped oil producers in more trouble.
The failure by the world’s largest oil-producing countries to reach agreement to freeze oil output could be devastating for Nigeria if predictions by leading energy analysts are anything to go by.
This is because the breakdown of the talks, according to them, will almost certainly lead to another collapse in oil prices until June when another meeting of the producers is due.
The 12-member Organization of the Petroleum Exporting Countries (OPEC), including non-OPEC producers such as Russia, met in Doha, Qatar last Sunday, to strike a deal to freeze oil output as a way to push up oil prices from its dramatic fall since 2014.
What the output freeze means is that the oil producers will commit to no more increases in oil supply.
Expectations about the meeting have been driving prices higher from below $30 per barrel in January to levels just above $40 over the last two months.
But the meeting ended without an agreement; and a key reason they failed to reach a deal, according to analysts, was the ongoing tension between Saudi Arabia and Iran, and the fact that not all OPEC members were present at the meeting.
Nigeria’s minister of state for petroleum resources, Dr. Ibe Kachikwu, told the CNBC in an interview, that a lot of issues were responsible for why there was no deal.
“The fact of Iran obviously not present was a major issue that concerned most OPEC members. We went back and forth, trying to work alignments, but it was clear that unless you had everybody in the ball pack, it doesn’t matter what we agree. Nobody was going to embark on a freeze until everybody was on board,” Kachikwu said.
In trying to understand why Iran failed to show up for the crucial meeting, the assistant director, Emerald Energy Institute for Petroleum and Energy Economics, Policy and Strategic Studies, Prof Chijioke Nwaozuzu, said Saudi was at loggerheads with Iran across the Middle East, mainly because both sides are struggling to maintain or regain their market share.
“I don’t see how they can get that agreement. There’s a battle for market share. Iran has bounced back to the market and they want to ramp up production and refining. They will not relent in the struggle for market share with Saudi Arabia and that struggle will be on for a while,” he said.
The consequences of the failed deal played out in the price of oil the next day as crude price went down to $40 per barrel, having earlier touched around $41.
Analysts expect prices to begin another downward spiral until June when OPEC member countries meet again to decide the next line of action.
Oil producers like Iraq, Nigeria and Venezuela are suffering severe economic pain. At current export levels, these three OPEC members in the cartel are losing millions of dollars in gross daily revenue at today’s prices compared to when they were around $115 per barrel in mid-2014.
Nigeria, which has been instrumental in the buildup to the Doha meeting, has experienced a drastic drop in oil revenue. Had the deal sailed through, it could have potentially raised oil price higher, which is what the country desires.
The head of Energy Research at Ecobank, Dolapo Oni, predicts that oil could trade around $36/37 per barrel until June when OPEC meets again. Other analysts forecast it could go even lesser.
Oni said, “The fact is that the global oil market remains oversupplied, and now, there are more worries that more supply could even come into the market because Saudi Arabia is threatening to ramp up production. Iran is also saying they are not agreeing to the output freeze because they want to increase production. We will be seeing a sort of political scenario in the oil market between now and June, which could position June as a date a deal could happen, but for Nigeria, that is not good.”
The president of the Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, said countries like Nigeria that depend on oil as a source of revenue would always run into trouble when the price goes down.
He said, “I can understand the minister going across to make sure that he gets value for the resources we have, but I think what he is doing is in the short run. In the long, in most emerging economies, when the price of oil is down, it is an input to grow the economy. You cannot afford to have high price energy to grow your economy. When the price is low, energy consumption is cheaper, and because it is an input in the economy, it is going to enhance productivity in the economy. But when you are in an economy in Nigeria, which looks at oil and gas as a source of money, whenever the price goes down your economy is in jeopardy.”
Also commenting, the vice president of NAEE, Dr. Hassan Mahmud, while stressing that Nigeria could still derive abundant benefit from the oil sector, said the shuttle by the minister to prop up prices was necessary in the short run because oil forms 90 per cent of the country’s revenue.
He said, “Studies have shown that emerging and developing economies digress when oil prices are going up. They cannot manage oil price boom, and that has led to this issue of: Have we really benefitted from higher oil prices or oil booms? Studies have also revealed that these are because we don’t have the institutional capacity to absorb these excess revenue booms.”
Read more at http://www.dailytrust.com.ng/news/business/more-troubles-for-nigeria-as-opec-oil-freeze-deal-fails/143782.html#Koh8fbvEgyRoe1Gd.99
Buhari tasks Maiduguri varsity to sustain efforts in oil search
By Chidimma C. Okeke
Apr 21 2016 11:44AM
President Muhammadu Buhari has tasked the University of Maiduguri, Borno state to show interest in relevant research in Nigeria’s search for oil in the Chad basin.
He said regardless of the declines in revenues, efforts in prospecting for oil especially in the Chad must be sustained.
A report from the National University Commission (NUC) disclosed that the president made the remark recently at the institution’s convocation ceremony.
The president also tasked the institution on the need to intensify research into positive ways of dealing with the consequences of shrinking of the Lake Chad Basin and its associated aquifers.
Buhari who was represented by the Executive Secretary of NUC, Prof. Julius Okojie said although part of the Lake Chad Basin was strategically located in Borno State, its current state of decline was of utmost concern to member countries of Lake Chad Basin Commission (LCBC).
He noted that statistics and satellite imaging had shown that the lake has receded to less than 20 per cent of its original size, saying since 1963, the surface area of Lake Chad has decreased from approximately 25, 000 to 1, 500 square kilometers.
He identified desertification, wrong irrigation, damning practices and climate change as mostly blamed for the problem.
Many people, according to him were dependent on the disappearing waters and forest resources and that the age old fishing tradition of the surrounding regions had all but disappeared thus food supply, livelihoods and indeed the security of millions of people are threatened.
He maintained that research had shown clear correlations between poor nutrition, poverty, ill health and insecurity of lives and poverty were due in part to high competition for scarce resources.
“Nigeria could not afford more unrest especially in the face of insurgency and other threats to lives and economy,” he said.
While urging the varsity to take advantage of its geographical location to build cooperation with Nigeria’s neighbours and advancing in practical terms true brotherhood, he commended the varsity on sustaining the momentum during the very trying period.
Read more at http://www.dailytrust.com.ng/news/education/buhari-tasks-maiduguri-varsity-to-sustain-efforts-in-oil-search/143478.html#A84zesWDK74oSISB.99
Nigeria Daily Trust
Apr 24 2016 5:00AM
Last week, a meeting between the world’s biggest oil producers ended without a deal to freeze production. The failure of the deal, which could have hastened a recovery in oil prices, puts Nigeria and other cash-strapped oil producers in more trouble.
The failure by the world’s largest oil-producing countries to reach agreement to freeze oil output could be devastating for Nigeria if predictions by leading energy analysts are anything to go by.
This is because the breakdown of the talks, according to them, will almost certainly lead to another collapse in oil prices until June when another meeting of the producers is due.
The 12-member Organization of the Petroleum Exporting Countries (OPEC), including non-OPEC producers such as Russia, met in Doha, Qatar last Sunday, to strike a deal to freeze oil output as a way to push up oil prices from its dramatic fall since 2014.
What the output freeze means is that the oil producers will commit to no more increases in oil supply.
Expectations about the meeting have been driving prices higher from below $30 per barrel in January to levels just above $40 over the last two months.
But the meeting ended without an agreement; and a key reason they failed to reach a deal, according to analysts, was the ongoing tension between Saudi Arabia and Iran, and the fact that not all OPEC members were present at the meeting.
Nigeria’s minister of state for petroleum resources, Dr. Ibe Kachikwu, told the CNBC in an interview, that a lot of issues were responsible for why there was no deal.
“The fact of Iran obviously not present was a major issue that concerned most OPEC members. We went back and forth, trying to work alignments, but it was clear that unless you had everybody in the ball pack, it doesn’t matter what we agree. Nobody was going to embark on a freeze until everybody was on board,” Kachikwu said.
In trying to understand why Iran failed to show up for the crucial meeting, the assistant director, Emerald Energy Institute for Petroleum and Energy Economics, Policy and Strategic Studies, Prof Chijioke Nwaozuzu, said Saudi was at loggerheads with Iran across the Middle East, mainly because both sides are struggling to maintain or regain their market share.
“I don’t see how they can get that agreement. There’s a battle for market share. Iran has bounced back to the market and they want to ramp up production and refining. They will not relent in the struggle for market share with Saudi Arabia and that struggle will be on for a while,” he said.
The consequences of the failed deal played out in the price of oil the next day as crude price went down to $40 per barrel, having earlier touched around $41.
Analysts expect prices to begin another downward spiral until June when OPEC member countries meet again to decide the next line of action.
Oil producers like Iraq, Nigeria and Venezuela are suffering severe economic pain. At current export levels, these three OPEC members in the cartel are losing millions of dollars in gross daily revenue at today’s prices compared to when they were around $115 per barrel in mid-2014.
Nigeria, which has been instrumental in the buildup to the Doha meeting, has experienced a drastic drop in oil revenue. Had the deal sailed through, it could have potentially raised oil price higher, which is what the country desires.
The head of Energy Research at Ecobank, Dolapo Oni, predicts that oil could trade around $36/37 per barrel until June when OPEC meets again. Other analysts forecast it could go even lesser.
Oni said, “The fact is that the global oil market remains oversupplied, and now, there are more worries that more supply could even come into the market because Saudi Arabia is threatening to ramp up production. Iran is also saying they are not agreeing to the output freeze because they want to increase production. We will be seeing a sort of political scenario in the oil market between now and June, which could position June as a date a deal could happen, but for Nigeria, that is not good.”
The president of the Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, said countries like Nigeria that depend on oil as a source of revenue would always run into trouble when the price goes down.
He said, “I can understand the minister going across to make sure that he gets value for the resources we have, but I think what he is doing is in the short run. In the long, in most emerging economies, when the price of oil is down, it is an input to grow the economy. You cannot afford to have high price energy to grow your economy. When the price is low, energy consumption is cheaper, and because it is an input in the economy, it is going to enhance productivity in the economy. But when you are in an economy in Nigeria, which looks at oil and gas as a source of money, whenever the price goes down your economy is in jeopardy.”
Also commenting, the vice president of NAEE, Dr. Hassan Mahmud, while stressing that Nigeria could still derive abundant benefit from the oil sector, said the shuttle by the minister to prop up prices was necessary in the short run because oil forms 90 per cent of the country’s revenue.
He said, “Studies have shown that emerging and developing economies digress when oil prices are going up. They cannot manage oil price boom, and that has led to this issue of: Have we really benefitted from higher oil prices or oil booms? Studies have also revealed that these are because we don’t have the institutional capacity to absorb these excess revenue booms.”
Read more at http://www.dailytrust.com.ng/news/business/more-troubles-for-nigeria-as-opec-oil-freeze-deal-fails/143782.html#Koh8fbvEgyRoe1Gd.99
Buhari tasks Maiduguri varsity to sustain efforts in oil search
By Chidimma C. Okeke
Apr 21 2016 11:44AM
President Muhammadu Buhari has tasked the University of Maiduguri, Borno state to show interest in relevant research in Nigeria’s search for oil in the Chad basin.
He said regardless of the declines in revenues, efforts in prospecting for oil especially in the Chad must be sustained.
A report from the National University Commission (NUC) disclosed that the president made the remark recently at the institution’s convocation ceremony.
The president also tasked the institution on the need to intensify research into positive ways of dealing with the consequences of shrinking of the Lake Chad Basin and its associated aquifers.
Buhari who was represented by the Executive Secretary of NUC, Prof. Julius Okojie said although part of the Lake Chad Basin was strategically located in Borno State, its current state of decline was of utmost concern to member countries of Lake Chad Basin Commission (LCBC).
He noted that statistics and satellite imaging had shown that the lake has receded to less than 20 per cent of its original size, saying since 1963, the surface area of Lake Chad has decreased from approximately 25, 000 to 1, 500 square kilometers.
He identified desertification, wrong irrigation, damning practices and climate change as mostly blamed for the problem.
Many people, according to him were dependent on the disappearing waters and forest resources and that the age old fishing tradition of the surrounding regions had all but disappeared thus food supply, livelihoods and indeed the security of millions of people are threatened.
He maintained that research had shown clear correlations between poor nutrition, poverty, ill health and insecurity of lives and poverty were due in part to high competition for scarce resources.
“Nigeria could not afford more unrest especially in the face of insurgency and other threats to lives and economy,” he said.
While urging the varsity to take advantage of its geographical location to build cooperation with Nigeria’s neighbours and advancing in practical terms true brotherhood, he commended the varsity on sustaining the momentum during the very trying period.
Read more at http://www.dailytrust.com.ng/news/education/buhari-tasks-maiduguri-varsity-to-sustain-efforts-in-oil-search/143478.html#A84zesWDK74oSISB.99
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