[JUST IN] Budget 2023: Fears as oil price drops 3% to $73.87 per barrel

There were fears, weekend, as the price of Nigeria’s premium oil grade, Bonny Light, dropped to $73.87 per barrel, from $76.37, recorded last week, indicating a fall of three percent.

The Federal government had benchmarked the 2023 budget at $75 per barrel and 1.8 million barrels per day, bpd, including condensate, which Nigeria has the capacity to produce between 300,000 – 400,000 barrels per day, bpd.

The drop in price that also affected other crudes was attributed to the global economic slowdown, especially some developed economies that buy commercial oil from Nigeria and other major oil nations.

In its latest report obtained by Vanguard, yesterday, Goldman Sachs – a research organization – disclosed that based on the global economic slowdown, it would not be possible for oil to hit $100 per barrel this year, which it had earlier forecasted.

Goldman Sachs noted that the current poor state of the global economy has already culminated in the collapse of two big banks in the United States.

The report which now expects oil price to hover at $94 per barrel in the coming 12 months, before landing at $97 per barrel in 2024, stated: “Oil prices have plunged despite the China demand boom given banking stress, recession fears, and an exodus of investor flows.”

Oil price, production

In its March 2023 Monthly Oil Market Report, Monthly Oil Market Reports, MOMRs, obtained by Vanguard, the Organisation of Petroleum Exporting Countries, OPEC, that Nigeria’s oil production rose MoM by 3.8 percent to 1.306 million bpd in February 2023, from 1.258 million bpd recorded in the preceding month of January 2023.

Also, on year-on-year, YoY, the nation’s oil production increased by 3.8 percent to 1.306 million bpd in February 2023, from 1.258 million bp/d recorded in the corresponding period of 2022.

Budget 2023 challenged — OGSPAN

Despite the rise in oil output, the National President, Oil, and Gas Service Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, observed that Nigeria might be challenged to meet its 1.8 million bpd OPEC quota, excluding condensate, because of increased pipeline vandalism, oil theft and illegal refining in the Niger Delta.

He said: “The governments still have a long way to go in funding the budget. We should not be comfortable because of the recent increase in production. There are indications that the recent gains remain by far less than the huge volumes we still lost to oil thieves in the Niger Delta.”

But in another interview with Vanguard, the Lead promoter, EnergyHub Nigeria, Prof. Felix Amieyeofori, noted that the current market situation would be short-lived.

He said: “This is seasonal. The average price forecast as China stabilizes this year will be around $80-100 bpd. It will bounce back.”

New administration should implement PIA — EnergyHub

He said: “The new Government in 2023 must ensure full implementation of the PIA in order to optimize the operating environment for investors. Otherwise, funding will be a challenge. There must be collective efforts from all sectors and agencies between government and the private sectors to midwife the 2023 budget targets.”

We intend to produce 2.2 million bpd — NNPC Limited

Recently, the Nigerian National Petroleum Company (NNPC) Limited said in 2023, Nigeria was working to realize an average of 2.2 million barrels per day (bpd), including condensate.

Speaking in an interview session at the 13th global United Arab Emirate, UAE virtual energy forum, Mele Kyari, group chief executive officer (GCEO), NNPC Limited, who attributed low production to the limited investment of the past, had said: “In our case, we have a different challenge other than just a lack of investment in the last four to five years. There has been no investment in the last four to five years. That is correct. That is true in many other jurisdictions where cash flows do not support the investment.

“In our case, we had a different challenge – security challenge – that became very manifest in early-2022. And of course, we took definite steps to bring back production and this is paying up.

“For instance, in around July, our net crude oil, excluding condensate, came down to around 1 million bpd. That is the lowest ever in the history of our country and our industry.”

He also said: “So for us, we see a trajectory of restoring production, including condensate, within the year. Definitely, we believe that we can hit our target of 2.2 million bpd but our OPEC target is 1.8 million bpd, but we know that it is practical to do 2.2 million within 2023.”