NIGERIA is contemplating suspending oil production for the foreseeable future as a result of the collapse in global petroleum prices brought about by the coronavirus pandemic which has led to crude being produced below production costs.
Following the outbreak of the global pandemic, industrial production has collapsed as economies have been shut down and commerce has ground to a halt. With nobody buying crude oil at the moment, stockpiles have grown in producing countries like Nigeria, leading to an unprecedented crash in prices to the point whereby it is pointless producing crude.
Last week, the prices of Brent Crude, the grade identical to Nigeria’s Bonny Light Crude fell to as low as $0 barrel, meaning that producers would have to pay buyers to take oil off them. faced with an impossible situation, the Nigerian National Petroleum Corporation (NNPC) is considering halting production if the prices continue to fall.
NNPC spokesman Kennie Obateru, said: “If the situation persists, it is something that is bound to happen definitely. We can’t keep producing if there is no market to sell to and it is not something that is peculiar to Nigeria. it is a global thing.
“However, it has not happened and for as much as I know and up till this morning, nothing of such has happened. We should be positive and hope that things improve but if the situation persists, definitely I think it will come to that.”
He stated that halting oil production could not be carried out without adequate preparation, adding that crude oil wells produce the gas Nigeria uses for power generation. Mr Obateru recommended that Nigeria considers how to get the best out of the current difficulties by finding buyers for her crude.
Earlier this month, Mele Kyari, the NNPC chief executive stated that Nigerian oil grades were not rejected even though they were stranded in the market. However, he confirmed that the 50 cargoes of Nigerian crude that were stranded in March as the country could not find buyers for them.
Mr Kyari said: “I am happy to announce that that number has gone down substantially. I don’t have the exact number for today but it is now less than 20.”
As of Wednesday at least three dozen cargoes of April and May-loading Nigerian crude were unsold, left lying at export terminals. They are unlikely to be absorbed by the refining systems of oil majors who were striving to attract buyers ahead of the imminent June programmes.