Budget 2024 under threat as oil price drops to $76.53 per barrel

December 13, 2023

Oil price dropped to $76.53 per barrel, from over $88 per barrel in the global oil market, presenting a major threat to the execution of next year’s budget.

  • By Emma Ujah, Abuja Bureau Chief, Udeme Akpan & Obas Esiedesa

WITH the 2024 federal budget going through legislative process at the National Assembly, the price of Nigeria’s Bonny Light, yesterday, dropped to $76.53 per barrel, from over $88 per barrel in the global oil market, presenting a major threat to the execution of next year’s budget.

The nation’s 2024 budget was benchmarked on $77.96 per barrel and 1.78 million barrels per day, bpd, based on some projections, especially developments in the global oil market.

But checks by Vanguard indicated that the prices of many crudes, including Nigeria’s Bonny Light, dropped to $76.53 per barrel, thus raising concerns among stakeholders on the funding of the budget.

The stakeholders are also worried that if the trend continues, it would adversely affect the performance of the 2024 budget, still being screened by the National Assemly.

Oil output drops by 7.4% to 1.25m bpd — NUPRC
In its latest report obtained by Vanguard, yesterday, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, indicated that oil production fell by 7.4 percent to 1.25 million barrels per day in the month of November compared to 1.35bpd in September.

Added to condensate oil, the data showed that total production also dropped by 6.1 percent to 1.466mbpd last month compared to 1.56mbpd recorded in September.

Oil theft still affecting output — NNPC
Despite renewed efforts against oil theft, the Nigerian National Petroleum Company Ltd, NNPC Ltd, said it recorded many cases of theft between December 2 and December 8, 2023, showing that it remains a major source of worry.

In its latest report – War on Crude Oil Theft – the oil company stated that it uncovered 51 illegal refineries, 29 illegal connections and eight vessels, having Automatic Identification System, AIS, infraction.

NNPCL, which noted that the crude oil thefts occurred at many locations in Bayelsa, Rivers, Delta, Abia and Imo State, said: “Two of the arrested individuals identified themselves as, Bernard Innocent from Isoko South in Delta State, and Adam Godstime, a resident of Owodokpokpo in Delta State.

“The incident took place in different regions, nine took place in the deep blue water, 50 in the Eastern region, 45 in the Central region while 23 took place in the Western region.”

In an interview with Vanguard, yesterday, the National President, Oil and Gas Service Providers association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “This is not good for the next year’s budget, barely a few more days to 2024 because Nigeria depends on oil to generate much of its revenue. It is also worrisome because oil theft is still going despite efforts made to eradicate or reduce it.

“The government should intensify efforts to diversify Nigeria’s economy while tackling oil theft, pipeline vandalism and illegal refining, currently affecting efficient production, export and revenue generation.”

Minister of State remains optimistic
Meanwhile, the Minister of State Petroleum Resources (Oil), Senator Heineken Lokpobiri, has disclosed that oil production in the country would surpass the 2024 budget target of 1.7 million barrels per day. Senator Lokpobiri disclosed this during a stakeholder’s interactive session on creating value and enabling investments in Nigeria’s oil and gas sector organised by Chevron Nigeria Plc.

The Minister in his statement yesterday, also said that the country has the capacity to increase crude oil production to two million barrels daily and expressed his commitment to fostering collaboration with stakeholders to enhance the country’s oil and gas sector amidst his ambitious target for the year 2024.

“The success of the upstream sector will determine the success of the midstream and the downstream and as a government, we are willing to sustain that engagement with the stakeholders, so that in the year 2024 and beyond, we will together ensure that we produce not just the 1.7 million bpd that we need for our budget but ensure that we produce what is needed to meet the local demand,” he stated.

Outlining the trajectory of oil production growth since the current administration took office, starting at about one million barrels per day and steadily increasing to 1.4 million barrels per day, he expressed his ambition to continue the upward trajectory, highlighting the government’s commitment to creating an enabling environment for stakeholders to thrive.

He pointed out that as “A new government that is business-friendly, with a clear mandate to ramp up oil production, we are willing to ensure that our fiscal regime is competitive globally. My appeal is that this old marriage, let us manage it, sustain it and improve on it. Whatever your concerns may be, let us put them on the table to disagree to agree.”

Senator Lokpobiri assured stakeholders that the government “Is working diligently to address the challenges facing the sector and is committed to providing the best playing field for both International Oil Companies, IOCs, and independents to make the necessary investments.

“As a country, we have the capacity to produce more than two million barrels per day. We have identified the issues bedevilling the sector and are already working on them. I will replicate this programme with all the IOCs and independents, so that we can make the sector work for all of us and Nigerians at large, and I know that 2024 will be a much better year.”

Europe gasps for Nigeria’s oil
Also, Executive Director, Crude and Condensate, Maryamu Idris, NNPC Trading Limited, said in a panel presentation at the just-concluded Argus European Crude Conference in London, weekend, that the Nigerian crude flow to Europe has increased in a bid to fill supply gaps left by the ban on Russian crude.

She pointed out that six months before the Ukraine war, 678,000 bpd of Nigerian crude grades went to Europe, compared to 710,000 bpd six months later and 730,000 bpd so far this year.

According to her, “This trend makes it evident that Nigerian grades are increasingly becoming a significant component in the post-war palette of European refiners.

“Several Nigerian distillate-rich grades have become a steady preference for many European refiners, given the absence of Russian Urals and diesel. Forcados Blend, Escravos Light, Bonga, and Egina appear to be the most popular, and our latest addition — Nembe Crude – fits well into this basket. This was a strong factor behind our choice of London and the Argus European Crude Conference as the most ideal launch hub for the grade.”

Idris, who identified pipeline vandalism and other challenges, noted that they were fast becoming a thing of the past with the introduction and implementation of a new framework for the domestic petroleum industry (the PIA of 2021), rejuvenating the business landscape, and re-positioning NNPC Limited to adopt a more commercial approach to the management of the nation’s hydrocarbon resources.

According to her, NNPC Limited has secured vital partnerships with notable financial institutions to promote upstream investments to restore and sustainably grow production capacity in the coming years.

She said: “NNPC Limited is championing concerted efforts in partnership with host communities and private stakeholders to address the security and environmental challenges in the Niger Delta to further fortify production growth.

“Suffice it to say we have already begun seeing significant progress on the rebound. In September 2023, Nigeria recorded its highest crude oil and condensate output in nearly two years, reaching 1.72 million barrels per day. This, we believe, is just the beginning of our production rebound.”

She affirmed that in addition to sustainably growing upstream production volumes, NNPC Limited was also increasing its participation in the downstream sector in line with a ‘wells-to-wheels’ approach, taking the country’s unique hydrocarbon molecules as close as possible to end-users.

Experts make case for more investment, diversification
Similarly, the Founder and Executive Chairman of AA Holdings, Mr. Austin Avuru has called for massive investment in oil and gass to meet set targets in the future.

He regretted that investment into Nigeria’s oil and gas industry had dropped by 77.3 percent to $5 billion in 2021, from $22 billion in 2014, due mainly to increased divestment by the International Oil Companies, IOCs. He said: “The IOCs are leaving and will continue to divest. The IOCs are not hiring and investing as much as they used to in the oil and gas industry. It is only a few independents that are still investing.

“The nation’s oil and gas reserves have been standing at more than 30 billion barrels and 203 trillion cubic feet respectively for too long. We need to increase investment to hit the 40 billion barrels reserves and 600 trillion standard cubic feet of gas in the coming years. That would require the deployment of many rigs.

“We need to increase funding. Significant infrastructure is required. We need to invest in infrastructure not only in the upstream sector but also in the midstream and downstream sectors.” His opninion was shared by other experts who spoke to Vanguard on the development.

BudgIT raises alarm over discrepancies, others
Meanwhile, BudgIT, has raised the alarm over what it considered deliberate provisions in the 2024 to perpetuate corruption and called for a review of a thorough scrutiny of the proposed 2024 budget now before the federal legislature.

The organisation which is one of the leading Non-Governmental Organisations, NGOs, promoting transparency, accountability, and effective service delivery in Nigeria, in a budget review issued by its Communications Associate, Nancy Odimegwu, in Abuja, yesterday, said that provisions for the renovations of the President’s and Vice president’s residences in Abuja were duplicated in the 2023 Supplementary Budget and the proposed 2024 budget.

Besides, it noted that the details of the 2024 Budget of the National Assembly must be made public.

BudgIT insisted that some of the loopholes in past budgets that created avenue for lack of transparency in budget implementation had been maintained in the 2024 and should therefore be reviewed.

According to the organization, many huge spenders among Government-Owned Enterprises had no details of their expenditures in the 2024 budget and that it should not be business as usual.

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