How we plan to achieve 2.3mb/d oil production this year –Kyari


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What does Nigeria take home from this OPEC meeting?

This meeting is part of the OPEC general meetings, but more important than that is that the market is suffering some form of instability and there was a necessity to balance that market which brought about the cooperation between the OPEC and non-OPEC members and in assessing the situation, it’s very obvious that there are some forms of imbalance from the market and that could lead to some distortion in the market. 

Therefore, the purpose of this meeting is to see how we could sustain the stability by looking at all fundamentals in the market and eventually all the parties (producers and buyers) will benefit from it.

You came to this meeting with some expectations. Now the meeting is over, are those expectations being met?

Our expectations were to come here and reach some consensus and alignments. So, our expectations are that, the conference will make the best decisions that are good for the market and that was what they did and we are not disappointed. As you can see, after the meeting, there were some alignments agreed to by all the parties. 

How did you arrive at such consensus despite the stance by some aggrieved members such as Iran?

I think what everybody needs to know is that OPEC has a very good governance structure that responds to all situations. For instance, it is clear that the decisions of the conference are for the ministers and then they have the board of governors who review all the technical inputs of all the lower levels of the organisation to analyse and guide the board of governors and the technical committee which also advises the board of governors. 

When you escalate it to the level of the ministers, it is a different ball game because that becomes a sovereign issue; countries have their positions, they have their view points and sometimes they like to sell their view points to the other parties so that eventually at the end of the day you have a consensus that is acceptable to all. One good thing with OPEC is that, it has never failed in reaching consensus. 

What are you doing back home to make sure that when there is such kind of alignment, Nigeria can take part in it unlike now that we don’t have the capacity to produce more oil like some other members?

Nigeria has been a very prominent member of OPEC; we are in alignment with all the decisions that took place over time. If there is production cut, Nigeria participates fully. We must understand that every country wants to be a reliable supplier of crude oil so that both your buyers and the market can plan with you. We have a number of challenges in the Niger Delta region which make it unpredictable for the market to know how much Nigeria will bring on the table despite the stability we achieved in the last six months because of the intervention by the government. 

What Nigeria would like to see is a situation where we have a stable and predictable production so that the market would plan with us. Of course, we would be glad to be part of the production cut by the OPEC or any other adjustment that may ensure stability of the market.

How would the Declaration of Cooperation impact on Nigeria’s economy and the oil and gas sector in general?

In many ways. First of all the Declaration of Cooperation brought stability in the market and not just that, in the real sense, it also brought more revenue to our governments and it was those revenues that were actually utilized to build infrastructure in the country and a number of intervention projects. Beyond that we also have this situation of Nigeria given the grace of providing the platform where we can now plough more investments as many of us are aware. We have done some sort of alignments with our partners, the IOCs. Part of it is for us to make some payments to them which wouldn’t  have easily come without such increase in revenue. 

So it has helped us substantially in balancing our budget and also balancing our investments in the oil and gas industry. You can see that we are among the biggest beneficiaries of the cooperation and I am sure you have seen from the OPEC report, there was almost $35 billion average of gain every month as a result of this activity and surely part of that amount comes to our account.   

What kind of reaction do we expect from the market after the 174th  OPEC meeting decision?

When you increase supply, if there is no parallel increase in demand we should expect downward trend of crude oil prices, but mind you in all the discussions including the OPEC reports, it clearly shows that there is increase in demand of oil in the international market. So it is possible that this increase in supply may help balance the market, therefore, we are not expecting substantial reduction in the price in the near future.

Is it not a bad signal that few days after the signing of the budget by President Muhammadu  Buhari, this decision is coming from the OPEC of increasing supply which may likely lead to reduction in prices?

I don’t think the oil benchmark in budget will become unrealistic in the short term and therefore I don’t see any challenge for the budget as a result of the decision by OPEC. Even if it does, budgets are living documents; when you underestimate in term of your revenue from crude oil, you can always have ways of supplementing that revenue. We should also realize that government revenue is no longer completely reliant on crude oil and gas. We are all aware that most of the revenue actually is not coming from oil and gas, which is a real shift in our country’s finance structure. 

Some media reports are still linking movement in oil prices with OPEC decisions and some are saying the decisions are political in nature. What is your take on that? 

OPEC is not a price fixing organisation; it tries to close the gap between supply and demand. When you do that you would have appropriate price. Whenever you have escalated demand, your supply is not meeting up you may likely have very high price sometime very unrealistic and in many cases affecting everybody – not just the producing countries.  You will have increase in the prices of  goods and services across the globe. 

So very high prices are not always good for even the producing countries, and therefore the decisions by OPEC are not meant to jerk up prices so that the countries will get more money. Higher oil prices usually cause global crises. If you recall, the global crises in 2008 did not just affect the consumer nations but everybody and at the end of the day you all lose. So balancing the market is in the best interest of all. 

What strategy has NNPC and government put in place to have some stability in oil production in the country?

As you know, many of the disruptions we recorded were actually as a result of the agitations and sometimes the activities of vandals. There is a very narrow difference between the two. But the reality today is that government at the highest level, with the participation of the vice president and the minister, Dr Ibe Kachikwu, has ensured that there is balance between the expectations of the communities in which we operate and also the expectations of the producers at the environment. It has resulted in that semblance of stability in the last six to seven months. That means that the engagements by the government which is different from what we used to have, where some of these boys were given some stipends to just keep quite, is working.  

In the next five to six months, it’s very obvious that even if we are not going to have 100 per cent peace, we are going to witness better environment to operate in such that everybody benefits – from the communities to the producers. 

With this stability in the region, why are we still producing 1.7 million per day; why are we not moving further?

When you talk about 1.7m barrels per day, you are actually talking about crude oil production for OPEC purpose. Condensate is out of the discussion of OPEC. The total national production which includes condensate is revolving around a little above 2 million barrels and there are a number of interventions to make sure that we wrap off this production. 

New production are coming up, for instance Egina is coming in by Total E&P, with about 200,000 barrels per day capacity that will automatically ramp of our production to 2.2 million barrels per day and there are a number of investments that are going on which will naturally increase our production. But mind you, as you are producing, natural decline sets in and so you have the balance in between. That is why are very comfortable in the government circle with that figure. 

We can make up to 2.3 million barrels per day, probably at the terminal end of 2018. So in terms of production numbers it will grow because of the activities that are going on now such as the stability in the region, the investments that are going on and the general understanding and clear acceptance that we have a government that is supporting peaceful resolution of issues in the country.

 

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