Nigeria’s daily oil production capacity for the rest of the year will be significantly below the revised volume of about 1.7 million barrels contained in the proposed amended 2020 Appropriation Act.
Based on the economic impact of the coronavirus pandemic, the Nigerian government announced a N320 billion cut in its 2020 budget, to about N10.27 trillion against the N10.59 trillion earlier passed by the national assembly and assented into law by President Muhammadu Buhari.
With the revised budgetary proposal, the crude oil price benchmark was reduced from the previous $57 per barrel to $30, while daily oil production volume was sliced from 2.18 million barrels to 1.70 million.
Nigeria to produce 1.4 million bpd
However, with Thursday’s resolution by the Organisation of Petroleum Exporting Countries (OPEC) to cut its members production, the Minister of State for Petroleum Resources, Timipreye Sylva, said Nigeria’s daily production would drop by almost 300,000 barrels from the proposed revised volume.
Mr Sylva, who was the head of the Nigerian delegation to the meeting held online, said Nigeria would now be producing 1.412 million barrels per day between May and June 2020 in the first phase of the group’s agreement.
He said between July and December 2020, Nigeria would produce about 1.495 million barrels per day in the second phase of the agreement, and another 1.579 million barrels per day between January 2021 to April 2022 in the third and final phase of the agreement.
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Despite the significant difference between the new OPEC output ceiling and the proposed production capacity in the 2020 budget, Mr Sylva expressed optimism Nigeria would still break even and meet its revenue target.
Condensate to the rescue
He said the OPEC production quota calculation does not usually cover condensate production, which Nigeria has the advantage of using to shore up its oil production capacity with an average of between 360,000 and 460,000 barrels per day.
“It is expected that this historic intervention when concluded will see crude oil prices rebound by at least $15 per barrel in the short term, thereby enhancing the prospect of exceeding Nigeria’s adjusted budget estimate that is currently rebased at $30 per barrel and crude oil production of 1.7 Million barrels per day,” Mr Sylva said.
“The price rebound may translate to additional revenues of not less than $2.8 billion for the federation,” he added.