Amid the current global oil price rally, Nigeria stands the chance to benefit immensely if only it can curtail oil theft to the barest minimum.
The global oil and gas price rally currently being experienced in the first quarter of 2023, is being fuelled by a combination of factors. The factors range from the recovery of the Chinese economy to the price cap implementation on Russian oil and gas supplies.
During the just concluded India Energy Week conference, Fatih Birol, the Executive Director of the International Energy Agency (IEA) said that the IEA expects that about half of the growth in global oil demand in 2023 will come from China.
According to him, China’s jet fuel demand is already exploding, putting upward pressure on demand.
- “If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies,” he stated further.
The Nigerian context: As a net oil and gas producer, Nigeria is set to benefit from this rally in the global markets, especially in this first quarter when economies are opening up and production capacity in terms of output refineries and natural gas processing plants. Oil and gas analyst, Kayode Oluwadare, explains this saying:
- “China’s economy is opening up after the loosening of its strict covid-19 policies so this will lead to increased demand for oil and gas as a major consumer. Nigeria is one of the key suppliers to China, we expect this to have a positive effect on Nigeria’s oil and gas sector in terms of increased demand for Nigerian oil and gas.”
According to Oluwadare, oil and gas output is improving in Nigeria and the government expects a further rise in production output. In its 2023 budget, Nigeria placed its benchmark crude production output at 1.69 million barrels per day. Meanwhile, the country’s OPEC quota is at 1.8 million barrels per day.
While speaking at the United Arab Emirates Energy Forum in January 2023, Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company said the country can achieve 2.2 million barrels per day of oil production as steps are being taken to tackle crude oil theft.
- “It is expected that since crude oil theft and vandalism have reduced to an extent, Nigeria should be able to gain from the oil and gas price rally in Q1/2023,” Oluwadare said.
Russian energy price cap: During the India Energy Week conference, Birol also said price caps on Russian oil have achieved the objectives of both stabilizing oil markets and reducing Moscow’s revenues from oil and gas exports. According to Birol, Russia’s revenues likely fell by nearly 30% or about $8 billion in January 2023.
The implementation of the Russian price cap is bound to affect every oil and gas-producing country in the world including Nigeria. Oluwadare told Nairametrics that Nigeria is a strategic producer and supplier to key European countries and the price cap in itself would cause supply issues for most European countries if alternative energy producers like Nigeria are not well considered.
- “To replace the Russian oil and gas that will result from this price cap, because Russia is going to pump less into the market, Europe has got to look out for alternative sources of oil and gas to replace the loss in Russian supplies.
- “Nigeria will benefit from the price cap because there is bound to be a movement in price due to increased demand. Once Russia pumps less into the market due to the price cap, oil and gas prices will jump, and if our production output increases, it means more revenue for us.”
For the record: During the KPMG Energy Day event in January 2023, Tola Adeyemi, the Regional Senior Partner (Nigeria and West Africa) at KPMG said that outgoing and incoming government administrations need to tackle crude oil theft and low investments in the sector by oil producers to achieve the 1.69 million barrels per day crude oil benchmark in the 2023 budget.
In its oil market report for January 2023, the IEA projects that global oil demand is set to rise by 1.9 million barrels per day (bpd) in 2023, to a record 101.7 million bpd, with nearly half the gain coming from China following the lifting of its Covid restrictions.