The Organization of Petroleum Exporting Countries (OPEC) raised the hope of Nigerian last week with the launch its World Oil Outlook 2017 on Tuesday. According to the report, crude oil production is expected grow in the years ahead. FESTUS OKOROMADU, writes on the prospect of the projection on the country’s economy.
At The OPEC secretariat in Vienna, the event on focus was the launch of World Oil Outlook (WOO) 2017, a research document that forecast the prospect of the oil and gas industry in particular and the energy industry in general. But at the national assembly complex in Abuja, the concern was the presentation of the 2018 National Appropriation Bill, commonly call, national budget.
One common stream that flow across both events is the place of crude oil as a life line to the robust economic wellbeing of the nation.
Speaking at the launch of the report, OPEC secretary general, Mohammad Barkindo, described 2016 as historic year for OPEC and the global oil industry. He noted that, “Since publication of the WOO 2016 in early November last year; the oil market has undergone fundamental change. It has been a period where the rebalancing of the global oil market has gathered vital momentum, buoyed by a number of important factors.”
On his part, Dr. Ayed S. Al-Qahtani, director, Research Division of OPEC, while presenting the report highlighted the multi-faceted nature of the oil industry and the impact of the ongoing market rebalancing process.
Specifically, he stated that on the medium-term outlook oil
would remain a fuel of choice for the foreseeable future. According to him, the security of supply and demand of the commodity were very much two sides of the same coin and went ahead to stress the importance of exploring and evaluating the possible challenges, uncertainties, as well as opportunities, the industry might face.
On the other hand, the Nigerian President addressing the national assembly back in Abuja, thanked the OPEC for supporting the country in its trying time. Expressing his gratitude he said, “I would like to thank our friends and partners in the Joint OPEC / Non-OPEC Ministerial Monitoring Committee (JMMC) who graciously granted Nigeria an exemption from the output cuts imposed on OPEC member countries in January 2017. This exemption, which was extended in September 2017, significantly helped during our most challenging time.
“We shall continue our positive engagement with other oil producing nations to ensure that the momentum generated is sustained,” he stated.
Speaking on how the commodity impacted the country’s economy in 2017, President Buhari noted that the relatively higher crude oil prices supported the nation’s economic recovery.
Acknowledging the role of peace in the Niger Delta as a recipe for stable crude oil production, the President said, “Our mutually beneficial engagement with oil producing communities in the Niger Delta contributed immensely to the recovery in oil production experienced in recent months.”
While thanking the leadership of the communities in the Niger-Delta for their continued support, he assured them of his administration’s readiness to continue to honour the commitments to them. He stressed that the country cannot afford to go back to what he called ‘those dark days of insecurity and vandalism’.
“We all want a country that is safe, stable and secure for our families and communities. This means we must all come together to address any grievances through dialogue and peaceful engagement. Threats, intimidation or violence are never the answer,” he added.
The government said it was working hard on the Ogoni Clean-up Project, this no doubt is to ensure that peace prevailed in the Niger Delta region.
According to Mr. President, his administration engaged international and local companies proposing different technologies for the clan-up exercise.
“Although the project will be funded by the international oil companies, we have made provisions in the 2018 Budget for the costs of oversight and governance, to ensure effective implementation,” he said.
Christened budget of consolidation, the government has proposed a total expenditure of N8.612trillion for 2018. Of this amount, government said it was projecting oil revenues of 2.442 trillion naira. Meanwhile the benchmark oil price of US$45 per barrel is projected while production is estimated at 2.3 million barrels per day, including condensates.
Due to the uncertainty in the oil industry, especially instability in production in-country, the government has proposed a deficit of budget of N2.005trillion for the 2018 fiscal year.
On how it plans to secure the funds to meet the deficit, the President said, “We plan to finance the deficit partly by new borrowings estimated at N1.699trillion. Fifty percent of this borrowing will be sourced externally, whilst the balance will be sourced domestically. The balance of the deficit of N306 billion is to be financed from proceeds of privatisation of some non-oil assets by the Bureau of Public Enterprises (BPE).”
Relevance of OPEC Forecast To Nigeria’s Economy
According to the OPEC Outlook, oil is expected to remain the fuel with the largest share in the energy mix throughout the period forecasted, which is 2040. Similarly, total primary energy demand is targetted to grow by 35 per cent.
In terms of production, OPEC’s forecast said long-term oil demand has been revised upward by 1.7 million barrels a day (mb/d) compared to the WOO 2016, with total demand at over 111 mb/d by 2040.
By implication, the prospect of increasing production in the years ahead is certain. If this is so the government can expect that the projected a production of 2.3mbpd for 2018 is achievable without fears of likely cuts from OPEC.
Better still the report gave the direction of the future market for the industry as it predicts that developing countries would continue to lead demand growth, increasing by almost 24 mbpd, to reach 67 mbpd by 2040.
Nigeria can therefore begin to source for new markets in developing counties where there is prospect of growth. It is obvious that with certain developments in the global crude oil market, and the rising price of the product, Nigeria needs only to put its house in order to harvest from the opportunities emerging.
However, the country must put the right fiscal policies in place. This is the more reason why the executive must put some pleasure on the legislature to pass the petroleum industry bill. Perhaps, with proper management of the difference between the benchmark oil price used for the budget and the actual, Nigeria may not need to borrow to fund the proposal.