{"id":7226,"date":"2016-01-18T03:09:26","date_gmt":"2016-01-18T03:09:26","guid":{"rendered":"http:\/\/newsroom247.com.ng\/?p=7226"},"modified":"2016-01-18T03:09:26","modified_gmt":"2016-01-18T03:09:26","slug":"nigeria-oil-fields-face-shutdown-amid-price-slump-as-crude-production-cost-almost-equals-selling-price-by-femi-asu","status":"publish","type":"post","link":"http:\/\/newsroom247.com.ng\/?p=7226","title":{"rendered":"Nigeria oil fields face shutdown amid price slump as crude production cost almost equals selling price by Femi Asu"},"content":{"rendered":"

\"shell\"\u00a0With crude oil trading around $30 per barrel in the international market from a peak of $114 in June 2014, production from Nigeria now faces a decline as some fields face an imminent shutdown if the low oil price persists. Industry players say operating some of the fields in the country is becoming uneconomic, with the selling price of oil being driven down close to the production cost level. The price of the Nigerian crude oil, Bonny Light, has fallen to $29.47 per barrel, according to the latest data obtained from the Central Bank of Nigeria. \u201cWhen oil price drops, we are all in serious trouble, because if the oil price and your unit operating cost are almost the same, it means that when you sell the oil, there is little profit or you are at a loss. Many companies are not far from there,\u201d the Project Director for the Uquo gas field development, a joint venture project by Frontier Oil Limited and Seven Energy, Alhaji Abdullahi Bukar, told our correspondent. \u201cThe unit technical cost of many of our producers is not far from $30 per barrel. So many companies are in trouble,\u201d he added. According to Bukar, the average production cost for many of the fields in the country is $24 to $25 per barrel. \u201cFor some fields, the production cost is well above $25, maybe $28. For some fields, it is well below $20 and $25. Many of the older fields, which are mostly with the International Oil Companies, have got high production costs,\u201d he said. Global financial services firm, Morgan Stanley, on Monday joined banks such as Goldman Sachs, City Group and Bank of America Merrill Lynch, in warning that prices could slide to $20 per barrel. Bukar said, \u201cThe production in Nigeria is going to suffer. In the last five years, we have not invested as much as we should to develop additional reserves. Once, we keep going like that, whether there is price change or not, the amount of oil Nigeria is going to be producing will go down. \u201cWhen the price drops as low as $20-$30 range, people who have got those old fields or fields where oil production cost is above the selling price will shut them down. There is no point in producing oil to sell at a loss.\u201d Nigeria, Africa\u2019s top oil producer, relies on crude oil for most of its export earnings and government revenue. Oil production in the country has continued to hover between 1.9 million barrels per day and 2.3 million bpd in recent years. President Muhammadu Buhari had projected crude oil production of 2.2 million bpd for this year\u2019s budget, down from 2.2782 million bpd in the 2015 budget, with oil-related revenues expected to contribute N820bn. Industry experts also say the continued decline in global oil prices would stall a number of deep-water projects in the country. The Chief Executive Officer, Petrosystem Nigeria Limited, Mr. Adeola Elliott, said, \u201cObviously, the plunging price will affect investment in new fields. I had a discussion with a top official in one of the IOCs operating in the country. What they have done now is to just keep maintaining the facility they have now and producing what they producing now. There is no more new investment.\u201d Prior to the drop in prices, several IOCs had in recent times shifted more of their focus to the offshore areas of the Nigerian oil industry as a result of onshore risks, with a number of planned deep-water projects expected to come on stream in the coming years. Deep-water oil projects that have yet to achieve Final Investment Decision include Bonga Southwest and Aparo (Shell); Zabazaba-Etan (Eni); Bosi, Satellite Field Development Phase 2 and Uge (ExxonMobil); and Nsiko (Chevron). An energy expert and Technical Director, Drilling Services, Template Design Limited, Mr. Bala Zakka, said with oil at $30 per barrel, the profits and projects, including Corporate Social Responsibility activities of many oil firms would be negatively affected. \u201cMajor deep-water projects will be affected because they are very expensive. If oil continues to fall, a lot of exploration and drilling campaigns will reduce. A lot of marginal field operators will not be able to drill new wells. There is every possibility that companies will retrench to be able to stay afloat,\u201d he said. The Head, Energy Research, Ecobank Capital, Mr. Dolapo Oni, said, \u201cOur production is really having issues, and I think it might be worse in 2016. Our production is likely to reduce this year. \u201cThere are not as many fields likely to come on stream this year. Most companies just want to focus on their existing production. So, it is possible we won\u2019t see as much new production come on stream to reverse the trend of decline in major fields we have. That might make production go down.\u201d Oil prices could reach as low as $10, Standard Chartered warned, stating, \u201cGiven that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the dollar and equity markets.\u201d Wood Mackenzie, the energy consultancy firm, said in a report last week that since the oil price collapse in 2014, 68 major upstream projects containing 27 billion barrels of oil equivalent had been deferred. This, it said, amounted to $380bn of capital expenditure deferred by total project spend in real terms. It stated, \u201cAs oil prices continue to fall and capital allocation tightens, we expect the list will grow further. The level of production impacted by these deferrals is material in a global context. \u201cThe FIDs on many of these projects have been pushed back to 2017 or beyond. Deep-water is hit the hardest. Over the next five years, $170bn of potential investment currently hangs in the balance across these 68 projects.\u201d Wood Mackenzie says, in all, some 27 billion barrels of oil equivalent in reserves, or 2.9 million barrels per day of liquids production, will not come on stream until early in the next decade, later than envisaged. High cost deep-water fields, particularly those in Angola, Nigeria and the Gulf of Mexico, requiring heavy upfront investment, account for more than half of that deferred production. Agency report<\/p>\n

Culled from: The Citizen Ng<\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a0With crude oil trading around $30 per barrel in the international market from a peak of $114 in June 2014, production from Nigeria now faces a decline as some fields face an imminent shutdown if the low oil price persists. Industry players say operating some of the fields in the country is becoming uneconomic, with […]<\/p>\n","protected":false},"author":2,"featured_media":6895,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"ngg_post_thumbnail":0,"spay_email":"","footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false},"categories":[7],"tags":[1204,1203],"class_list":["post-7226","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion","tag-bonny-light","tag-crude-oil-price"],"jetpack_featured_media_url":"http:\/\/newsroom247.com.ng\/wp-content\/uploads\/2015\/12\/shell.jpg","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p4oswh-1Sy","_links":{"self":[{"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/posts\/7226","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7226"}],"version-history":[{"count":1,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/posts\/7226\/revisions"}],"predecessor-version":[{"id":7227,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/posts\/7226\/revisions\/7227"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=\/wp\/v2\/media\/6895"}],"wp:attachment":[{"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7226"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/newsroom247.com.ng\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}