The Nigerian National Petroleum Company Limited (NNPC) has disclosed that the country will export Premium Motor Spirit by mid 2023 as local refining capacity is set to jump to 1.1 million barrels per day.
Although this is not the first time such a promise has been made, Group Chief Executive Officer of the commercialised entity, Mele Kyari, told the international community virtually at the 13th Global UAE Energy Forum that the country will also increase crude oil production to 2.2 million barrels per day.
Nigeria’s economy has struggled to thrive due to developments in the nation’s oil and gas sector. With the country’s refining capacity at near zero utilisation capacity, billions of dollars are being spent to import PMS and sold at a subsidized rate. The crude oil production capacity was also at record low last, worsening foreign exchange crisis and inflation.
Nigeria’s crude oil production has in the last seven years remained low amid rising theft and vandalism leading to shut-in of oil wells and loss of investment to other African countries.
The state of the refineries, the monopoly in the sale of premium motor spirit, import of dirty fuel, subsidy payment and alleged corruption in the sector have reportedly brought the oil sector to its knees.
But Kyari foresaw what could be a break even as he insisted that the country would produce PMS to national capacity and export deficit.
“Security challenges around oil operations in the country became very manifest early on in 2022 and we took steps to bring back production, which have paid off. In July, net crude oil output, excluding condensates, had dropped to one million barrels, the lowest in the history of our industry. By the end of December, production was 1.5mbd and the trajectory for the end of this year, including condensates, is 1.8mbd to 2.2mbd,” Kyari said.
According to him, in terms of products, when the country gets its refinery capacities back by mid-year, the combined national capacity will be around 1.1 million barrels, so the country will have a net difference that will have to be exported as that exceeds domestic requirements.
Speaking on the global crude oil market, Kyari stated in a video shared on the NNPC Twitter handle that the volatility in prices last year was unprecedented.
He said the line of sight around new production coming online was also limited because of the general lack of investment and financial constraints, therefore, significant recovery in supply over the next two years would be elusive.
“That means we will have to live with this range of prices for a while to come. And demand will not collapse – the world is coming back from COVID-19 and there are many countries, particularly, in sub-Saharan Africa, where economies are growing very fast, against all odds. So, $75 to $80 oil is a very realistic price for the time being,” he noted.
For Nigeria, high oil and low prices come with similar challenges due to the lack of local refineries. The 2023 budget was pegged on crude oil benchmark price of $75 per barrel.
Kyari said while oil producers and consumers in the industry see $60 oil as a good price, but learn to live with $75 to $80 should there be a supply chain challenge, such development “is of course a challenge for many African countries.”
While the Federal Government had said money is being borrowed to finance the subsidy, Kyari said NNPC is not at loss as it signed a service agreement and has required cash flow to supply petroleum products to the country.
“Our relationship with the government today in terms of fuel supply is commercial. There is a service level agreement between us to supply fuel and sell at the price that the policy decision of the government stipulates. It is not a problem for us as a corporate entity,” he noted.