The Minister of State for Petroleum, Dr. Ibe Kachikwu, has said that Nigeria will have to increase oil output by an average of 900,000 barrels per day (b/d) in order to recover crude oil that has been shut in to a series of militant attacks on oil and gas assets in the Niger Delta in recent months.
Kachikwu, who spoke to CNN’s Richard Quest last night, however said he was not particularly optimistic about the possible talks on a production freeze by other oil producing countries to bolster prices, saying similar efforts a few months ago had failed.
Despite his lack of confidence, the price of crude oil rose yesterday following reports that Russia and the Organisation of Petroleum Exporting Countries (OPEC) may resume dialogue on a production freeze.
The petroleum minister said the federal government was in continuing dialogue with militants and their representatives in the Niger Delta and expressed confidence that in the next one or two months, a resolution will be reached to end the attacks on oil assets.
“There’s a lot of dialogue, a lot of security meetings and we expect that in the next one or two months, we will arrive at a lasting resolution on the problem in the Niger Delta,” he said.
He added that Nigeria would need to produce on average 900,000b/d extra to recover oil and the attendant revenue lost to the militancy in recent months.
“We are producing some 1.5 million barrels per day and would need on average 900,000 barrels per day to catch up on what we have lost. If we can achieve peace, this will be feasible,” he said.
However, when he was reminded by Quest that an extra 900,000b/d would run contrary to possible talks next month on a production freeze in order to shore up oil prices, Kachikwu said he was not optimistic that a consensus could be reached on an output cap, as efforts in the past had failed.
“I’m not too optimistic about an output freeze, because we tried this in the past and it failed.
“Also, OPEC accounts for 30 per cent of total global output, so we will need to be aggressive in our engagements with producers that account for 70 per cent of output, so it is only if a consensus is reached, then me have some hope,” he explained.
On yesterday’s criticism by parents of the Chibok girls that the military and its resources were being diverted to secure oil facilities instead of recovering the schoolgirls who were kidnapped from their school by Boko Haram two years ago, he said it was not true that the girls were less important than oil facilities in the Niger Delta.
“It is not true that oil facilities are more of a priority than the Chibok girls. As you know President Muhammadu Buhari from the outset of his administration built a coalition with neighbouring countries to defeat the terrorism in the North-east.
“He also had to set up a panel to probe the diversion of funds meant for the procurement of arms to fight the insurgency. All these suggest that the insurgency in the North-east is a major priority of this government.
“I am a father and I can imagine what it means to have my children kept in captivity in a forest and the president feels the same way. So he has not given up the girls,” the minister said.
Meanwhile, the price of crude oil rose yesterday following reports that Russia and OPEC may resume dialogue on a production cap.
The Wall Street Journal (WSJ) reported that the global oil benchmark Brent crude rose 0.9 per cent to $47.38 a barrel on London’s Intercontinental Exchange (ICE) futures exchange. It however traded on the New York Mercantile Exchange, West Texas Intermediate futures at $44.86 a barrel, up 0.8 per cent.
Both the WSJ and UK’s Telegraph reported that the price movements were triggered by comments made by Saudi Arabia’s Energy Minister, Khalid al-Falih and Russian Energy Minister, Alexander Novak that market action was likely if discussions at an upcoming meeting in Algeria between OPEC and its other ally producers go well.
According to WSJ, prices have gained since Saudi’s al-Falih signalled last week that his country was open to measures to stabilise the market which has been struggling with oversupply for the past two years.
Saudi is the biggest producer among members of OPEC and historically seen as the de facto leader of the oil cartel. The OPEC meeting in Algeria is scheduled as an informal gathering in September.
The Telegraph also reported that the price movement was in reaction to the OPEC Algeria meeting where the focus is expected to return to a possible supply cap deal after similar talks in Doha failed earlier this year.
Novak confirmed Russia’s participation at the Algeria meeting to Saudi newspaper, Asharq al-Awsat. Novak stated that his country – the world’s third largest supplier of oil – was also involved in early discussions.
He said: “We are co-operating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability.”
At the weekend, al-Falih told the Saudi Press Agency that “we are going to have a ministerial meeting of IEF in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilise the market”.
He added: “We’ve said before that market rebalancing is already taking place but the process of clearing crude and product inventories will take time. We are on the right track and prices should reflect that.”
Oil price recovery from a 12-year low of $28 a barrel in January had floundered last month when global economic fears reignited concern that there was a glut in the market, causing prices to slump back to $41.66 a barrel.