As the world grapples with the latest crude oil crash caused by the Coronavirus (COVID-19) epidemic, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mr Mele Kyari, has urged Nigerians to brace up for an unsavory economic climate in the months ahead as the journey may not be rosy.
This was even as he revealed that about 50 cargoes of crude oil were yet to find landing due to the outbreak of the virus.
Kyari, who made this known at the Central Bank of Nigeria (CBN) RoundTable discussion in Abuja Wednesday, said the development implies that there are no off-takers for the vessels for now due to drop in demand.
“Today, I can share with you that there are over 12 stranded LNG cargoes in the market globally. It has never happened before. LNG cargoes that are stranded with no hope of being purchased because there is abrupt collapse in demand associated with the outbreak of Coronavirus,” Kyari submitted.
He said that in the face of the global pandemic, countries like Saudi Arabia have given discount of $8 and Iraq $5 to their off-takers in some locations meaning that when crude oil sells at $30 per barrel, countries like Saudi Arabia is selling at $22 per barrel and Iraq selling their crude at $25 per barrel.
He said this bumpy ride would be felt for up to three months, regardless of the improvement in crude oil price in the international market.
Speaking at the second edition of ‘Going for growth’, a consultative forum with the Central Bank of Nigeria (CBN) Governor, held in Abuja, Kyari noted that 12 cargoes of LNG were currently stranded across the world, with 50 Nigerian oil vessels roaming the international waters without any market to sell the product.
Kyari also noted that Nigeria’s challenges have been worsened by high cost of crude production, a development that threatens to evict the country out of the globally competitive sector.
He said: “When the oil market collapses, everything collapses. It signifies the importance of the oil market.
Today, the best of our production system in Nigeria is $15-17 a barrel.
“So, there are many countries whose cost of production is $30 and we’re one of them. So, when the price now goes to $22 and we’re producing at $30, we’re out of business. Beyond that also, we have competition.
“But we have expectations and we have plans. The belief is that we can shift our reserves from 37-40 million barrels in the next two to three years. Inasmuch as our expectations are high, we must produce crude today even at low prices. The market operates in such a way that we don’t know what tomorrow will bring. The assumption for this year was $60 a barrel as an average.
“Now, we are faced with sub-$30 and potentially, we haven’t seen the bottom. We hope we’re seeing the bottom and if it is not, it’s a huge challenge that creates a cycle of problems for us and difficult to manage. It’ll affect all sectors. We don’t have the capacity to finance the oil and gas industry in this country. If we don’t do this and with the competing needs and resources across the world, what it means is that we cannot compete because nobody will want to put his money here.
“With the oil market slump on Monday, the realities on ground is beginning to dawn on us” he stated.
In his remarks at the event, the CBN Governor, Mr Godwin Emefiele, said the apex bank was ready to intervene in the health sector following the outbreak of COVID-19.
According to him, plans are afoot to support the government by helping to develop specialist hospitals across the country.
He added that the bank’s intervention would be in the area of diagnosis and surgery, pointing out that this would reduce the foreign trip to oversea countries being embarked on by Nigerians in search of medical attention.
He said: “Given the impact of coronavirus, I heard some countries are trying to ban export of some pharmaceutical products, we must look inward at this time.
“CBN is also working to support the pharmacy and pharmacology industry” he said. On why Nigerians do not patronise made in Nigeria sanitisers, Emefiele urged people, owners of patent outlets and pharmacies to buy such products being produced in the country.