*NNPC moves to reduce production cost
After weeks of unprecedented global lockdown occasioned by the
coronavirus pandemic that has ravaged businesses, forcing closures
and massive supply glut in the oil market, respite appears to be on
the horizon. Group Managing Director of Nigerian National Petroleum
Corporation (NNPC), Mr Mele Kyari, dropped the hint at the weekend
in Abuja during a chat with journalists.
Kyari said the glut in the international crude oil market in the
last few weeks was gradually easing off, causing prices to pick up
slowly, as traders began to find a home for the commodity in their
countries.
He stated, “At this point, we have seen a gradual easing of the
situation. Those numbers of the uncommitted cargoes have gone down
drastically and that’s why we see a gradual rise in prices in the
last three to four days. It means that those uncleared transactions
are now easing off.”
The NNPC GMD, however, explained that contrary to reports in
some quarters that Nigeria’s crude oil vessels were floating on the
high seas because buyers were not available, there was actually no
physical vessel offshore waiting for customers.
There were insinuations recently that an estimated 84 million
barrels of Nigerian crude oil were stranded at sea as the country
was short of storage due to low global demand and falling prices.
Some of the reports said cargo ships filled with Nigerian crude had
“nowhere to go” while “a tanker was turned back from the US Gulf
Coast, returning to the Canary Islands, where other Nigerian-hired
ships are idle”.
But Kyari, who spoke with journalists at the NNPC headquarters
in Abuja, explained that the product was usually sold two months
ahead, stressing that all crude oil transactions in the
international market are done on paper ahead of time.
He said, “When you hear stranded cargo, it doesn’t mean crude
oil that’s floating somewhere. Crude oil is always sold two months
ahead and it’s on paper. Once you have that allocation or you have
purchased the paper, it is now the business of the trader where to
take it. They either take it to a refinery or to storage.
“So, anytime you hear there are stranded cargoes it means they
have not decided whether to take it to storage or they have not
found the refinery at that point in time. So, it’s not any cargo
floating at anytime that everybody can see.
“And when you hear stranded cargoes now, we are actually talking
about June. We are now in May. This crude oil has not even gone out
of the ground. So, there are many decisions customers can make.
They can decide now to ask for a shutdown so that the crude does
not even come to the surface.”
Responding to a question on the alleged shutdown of some
ExxonMobil facilities in the country, the NNPC boss explained that
while he could not specifically say the international oil company
had done so, it could be for two reasons.
He stated, “As for ExxonMobil shutting down, I do not have the
exact situation, but shutting down can be for two reasons: one, we
have agreed to cut down production with the OPEC+ agreement and we
are going ahead to reduce production from some of the wells.
“You can also shutdown for technical reasons and I don’t know
which one is the case, but we have asked all our partners to take
production cuts which means you have to shut down some of these
wells.
“It may be for that purpose, but I don’t know the specific one in
question, but either way, it is either for technical reasons or
because of the OPEC+ agreement.”
On the cost of production per barrel of oil in the country,
which remains one of the highest in the world, Kyari said the
Minister of State for Petroleum, Mr Timipre Sylva, had given clear
instructions to that effect, which the corporation was already
carrying out.
Kyari said, “For the cost of production, the instructions were
very clear and we are reducing it through many initiatives and one
of them is to make sure we don’t go into businesses that we
shouldn’t. We also make sure we shorten our contracting circle.
“We plan better now in the industry and we have set cost to
remuneration in every intervention that we do and the net result is
the manifestation of all these in our cost of production that is
clearly going down. Once this is done, production rises, revenue
rises and cost per barrel definitely comes down and we are
confident because it’s working and those targets will be met.”
The GMD also stressed that the work on the refineries in the
country was being delayed because of the COVID-19 pandemic, which
has restricted the mobilisation of technical manpower
internationally since February.
“It requires massive movement of men and equipment and none of
them can work without the travel restriction being lifted,” he
said, adding, “But we are making the necessary ground arrangement,
so that once we take off, we apply maximum speed. It’s not
jeopardised. We will go ahead just like the others.”
*NNPC moves to reduce production cost
After weeks of unprecedented global lockdown occasioned by the
coronavirus pandemic that has ravaged businesses, forcing closures
and massive supply glut in the oil market, respite appears to be on
the horizon. Group Managing Director of Nigerian National Petroleum
Corporation (NNPC), Mr Mele Kyari, dropped the hint at the weekend
in Abuja during a chat with journalists.
Kyari said the glut in the international crude oil market in the
last few weeks was gradually easing off, causing prices to pick up
slowly, as traders began to find a home for the commodity in their
countries.
He stated, “At this point, we have seen a gradual easing of the
situation. Those numbers of the uncommitted cargoes have gone down
drastically and that’s why we see a gradual rise in prices in the
last three to four days. It means that those uncleared transactions
are now easing off.”
The NNPC GMD, however, explained that contrary to reports in
some quarters that Nigeria’s crude oil vessels were floating on the
high seas because buyers were not available, there was actually no
physical vessel offshore waiting for customers.
There were insinuations recently that an estimated 84 million
barrels of Nigerian crude oil were stranded at sea as the country
was short of storage due to low global demand and falling prices.
Some of the reports said cargo ships filled with Nigerian crude had
“nowhere to go” while “a tanker was turned back from the US Gulf
Coast, returning to the Canary Islands, where other Nigerian-hired
ships are idle”.
But Kyari, who spoke with journalists at the NNPC headquarters
in Abuja, explained that the product was usually sold two months
ahead, stressing that all crude oil transactions in the
international market are done on paper ahead of time.
He said, “When you hear stranded cargo, it doesn’t mean crude
oil that’s floating somewhere. Crude oil is always sold two months
ahead and it’s on paper. Once you have that allocation or you have
purchased the paper, it is now the business of the trader where to
take it. They either take it to a refinery or to storage.
“So, anytime you hear there are stranded cargoes it means they
have not decided whether to take it to storage or they have not
found the refinery at that point in time. So, it’s not any cargo
floating at anytime that everybody can see.
“And when you hear stranded cargoes now, we are actually talking
about June. We are now in May. This crude oil has not even gone out
of the ground. So, there are many decisions customers can make.
They can decide now to ask for a shutdown so that the crude does
not even come to the surface.”
Responding to a question on the alleged shutdown of some
ExxonMobil facilities in the country, the NNPC boss explained that
while he could not specifically say the international oil company
had done so, it could be for two reasons.
He stated, “As for ExxonMobil shutting down, I do not have the
exact situation, but shutting down can be for two reasons: one, we
have agreed to cut down production with the OPEC+ agreement and we
are going ahead to reduce production from some of the wells.
“You can also shutdown for technical reasons and I don’t know
which one is the case, but we have asked all our partners to take
production cuts which means you have to shut down some of these
wells.
“It may be for that purpose, but I don’t know the specific one in
question, but either way, it is either for technical reasons or
because of the OPEC+ agreement.”
On the cost of production per barrel of oil in the country,
which remains one of the highest in the world, Kyari said the
Minister of State for Petroleum, Mr Timipre Sylva, had given clear
instructions to that effect, which the corporation was already
carrying out.
Kyari said, “For the cost of production, the instructions were
very clear and we are reducing it through many initiatives and one
of them is to make sure we don’t go into businesses that we
shouldn’t. We also make sure we shorten our contracting circle.
“We plan better now in the industry and we have set cost to
remuneration in every intervention that we do and the net result is
the manifestation of all these in our cost of production that is
clearly going down. Once this is done, production rises, revenue
rises and cost per barrel definitely comes down and we are
confident because it’s working and those targets will be met.”
The GMD also stressed that the work on the refineries in the
country was being delayed because of the COVID-19 pandemic, which
has restricted the mobilisation of technical manpower
internationally since February.
“It requires massive movement of men and equipment and none of
them can work without the travel restriction being lifted,” he
said, adding, “But we are making the necessary ground arrangement,
so that once we take off, we apply maximum speed. It’s not
jeopardised. We will go ahead just like the others.”