EngrXrix:

Not really. The maths behind this is that Nigeria has to ramp up production. Probably by 50% more. It is better to sell a product for 5 naira and have 100mil buyers than sell for 100naira with only 10000 buyers. It’s same principle the saudis are using. By selling cheaper we get more customers then we can balance out the negatives of the trade. This may even lead to employment in exploration and production only diff is salaries won’t be as big as before.
Just Incase u are wondering, I’m in the system and this I know as a fact.

Not really. This particular situation is novel. We have a demand shock from the Covid-19 pandemic at the same time a supply shock from the OPEC+ disagreement.

Currently, demand is very low and supply is too high. Saudi and Russia both have cash reserves to balance their budgets for the next 5-10 years at prices below $25.
However, Nigeria; a major import-based economy with no diversification has depleted cash reserves, has to sell lower volumes at a discount and yet has fewer customers and also cannot balance her budgets at that price ( Budgets are bloated and capital expenditure + health+ education is low priority: 3 key aspects that boost an economy).

We can't also increase production because over the past decades we had not invested in the needed exploration activities to assure proven reserves(dilly-dallying with PIB and politicizing everything ). You can only increase production significantly from drilling new fields ( But new drilling requires higher oil price to be justifiable- No one drills new projects in a low oil price regime)and ramping up existing fields (which would make the reserve volumes-in-place to finish quicker since existing fields volumes are fixed and currently depleting plus you can't just increase well production by 50%, you would incurr several technical problems like coning etc and your well would be shut-in).

Again, if you ramp up production anyway, you add further volumes to the glut in the market already and Saudi et al would respond in kind and give even juicier discounts premium customers ( Saudi produces 9.6MMBOPD while Nigeria does say 1.6MMBOPD, we cant stand their power and their proven reserves are more than 10x ours.

It's a double whammy! Just that Nigeria is screwed for not preparing!

That's why we have been advocating for merit-based systems rather than quotas in the country. So that the best people are running the affairs.

NaijaMutant:



Our next president after the Kovik-1-9 birus will really have a tough job to do

...that is if Nigeria survives "Kovik 1-9 birus"

Not a good time.

Gilgil:


Not really. This particular situation is novel. We have a demand shock from the Covid-19 pandemic at the same time a supply shock from the OPEC+ disagreement.

Currently, demand is very low and supply is too high. Saudi and Russia both have cash reserves to balance their budgets for the next 5-10 years at prices below $25.
However, Nigeria; a major import-based economy with no diversification has depleted cash reserves, has to sell lower volumes at a discount and yet has fewer customers and also cannot balance her budgets at that price ( Budgets are bloated and capital expenditure + health+ education is low priority: 3 key aspects that boost an economy).

We can't also increase production because over the past decades we had not invested in the needed exploration activities to assure proven reserves(dilly-dallying with PIB and politicizing everything ). You can only increase production significantly from drilling new fields ( But new drilling requires higher oil price to be justifiable- No one drills new projects in a low oil price regime)and ramping up existing fields (which would make the reserve volumes-in-place to finish quicker since existing fields volumes are fixed and currently depleting plus you can't just increase well production by 50%, you would incurr several technical problems like coning etc and your well would be shut-in).

Again, if you ramp up production anyway, you add further volumes to the glut in the market already and Saudi et al would respond in kind and give even juicier discounts premium customers ( Saudi produces 9.6MMBOPD while Nigeria does say 1.6MMBOPD, we cant stand their power and their proven reserves are more than 10x ours.

It's a double whammy! Just that Nigeria is screwed for not preparing!

That's why we have been advocating for merit-based systems rather than quotas in the country. So that the best people are running the affairs.

Very valid point I like how you dissect the situation. but as a nation we have to try. Nigeria’s crude grade is still one of the best in the world. Oil from the Mid East is heavy with sulfur so that’s the leverage Nigeria has I believe.
And I was talking about ramping up existing fields production. After all wats the point of having all that oil when u can’t sell it? If the proven reserves deplete then so be it. But we need to get more customers to buy our oil if it’s going to be sold cheap.

Hungarriman:
But seplat and shell said that they will be cutting cost and reducing their drilling from 15-20 wells and focus on 3-4 wells and I believe what they are doing is not in anyway ramping up production.

For new wells yes but for existing wells they could ramp it up if they decide. Only thing is proven reserves will deplete quickly but then I ask again, what’s the point of having all that proven reserves when u can’t sell the product?

EngrXrix:

Not really. The maths behind this is that Nigeria has to ramp up production. Probably by 50% more. It is better to sell a product for 5 naira and have 100mil buyers than sell for 100naira with only 10000 buyers. It’s same principle the saudis are using. By selling cheaper we get more customers then we can balance out the negatives of the trade. This may even lead to employment in exploration and production only diff is salaries won’t be as big as before.
Just Incase u are wondering, I’m in the system and this I know as a fact.

Dead on arrival!
Nigeria is an insignificant player. I would have given them a blueprint but for the fact Nigeria treats the oil producing area like a conquered territory I won't. I pray it sells for less than $10.

EngrXrix:

Very valid point I like how you dissect the situation. but as a nation we have to try. Nigeria’s crude grade is still one of the best in the world. Oil from the Mid East is heavy with sulfur so that’s the leverage Nigeria has I believe.
And I was talking about ramping up existing fields production. After all wats the point of having all that oil when u can’t sell it? If the proven reserves deplete then so be it. But we need to get more customers to buy our oil if it’s going to be sold cheap.

I guess you are probably "asleep" like Nigeria's policymakers! The USA also produces grades with low sulphur, very similar to what Nigeria has.

Nigeria has inadvertently disarmed herself in any way you want to see it. They are an unreliable supplier, they sell blood oil, no country destroys the environment like Nigeria. In fact, if any company wishes to sell well, all they have to do, is emphasis the fact they don't sell blood oil from Nigeria!

In terms of output, Nigeria's output is about 2.2 million. America produces 13 million, Saudi Arabia 10million and Russia about 9 million.

Nigeria shouldn't even be exporting oil. Under normal circumstances, a country Nigeria's size and population
should be importing to complement domestic production.

UnaToto:
UnaToto

Remember that you shall be judged by every idle word you speak. Matthew 12 :36

EngrXrix:

Very valid point I like how you dissect the situation. but as a nation we have to try. Nigeria’s crude grade is still one of the best in the world. Oil from the Mid East is heavy with sulfur so that’s the leverage Nigeria has I believe.
And I was talking about ramping up existing fields production. After all wats the point of having all that oil when u can’t sell it? If the proven reserves deplete then so be it. But we need to get more customers to buy our oil if it’s going to be sold cheap.

Thanks.
2 extra things going against us that were not there a decade ago.

1. Our customers are now our competition e.g. USA
2. Our neighbours are now our competition e.g. Ghana, Senegal, Muaritania, etc.

Oil demand is in the direction of Asia. Supply chain and logistics does not really favour us versus the mid-east.

What differentiation do we have in the market? Sweet light crude? We are not the only one.

USA has their power and technology, Saudi has huge productiin and money+ closer to Asia. Irs a market share war and not a pricing war nd Saudi has leveraged for the future. We don't have a great image as per foreign policy abroad so we can't push for stuff really.

Plus renewables are inching in to grab market share no matter how small. We are not even thinking to be there yet.

PHijo:


I guess you are probably "asleep" like Nigeria's policymakers! The USA also produces grades with low sulphur, very similar to what Nigeria has.

Nigeria has inadvertently disarmed herself in any way you want to see it. They are an unreliable supplier, they sell blood oil, no country destroys the environment like Nigeria. In fact, if any company wishes to sell well, all they have to do, is emphasis the fact they don't sell blood oil from Nigeria!

In terms of output, Nigeria's output is about 2.2 million. America produces 13 million, Saudi Arabia 10million and Russia about 9 million.

Nigeria shouldn't even be exporting oil. Under normal circumstances, a country Nigeria's size and population
should be importing to complement domestic production.

So you can’t join a simple conversation without introducing any iota of insult right?
Do u think you first five words was necessary?
Did you not see the way the other guy and I was discussing?
Una sef Dey tire person for this social media.
I don’t blame u tho.

EngrXrix:

So you can’t join a simple conversation without introducing any iota of insult right?
Do u think you first five words was necessary?
Did you not see the way the other guy and I was discussing?
Una sef Dey tire person for this social media.
I don’t blame u tho.

I wasn't expecting you to view my post as offensive. I apologise that it came across as such.

DonFreshmoney:
Hahaha I no know why this news dey sweet me die..

Nigeria needs to be reformatted to progress.. this should sound as a wake up call to our leaders if we have leaders that have sense.

We are all the leaders of ourselves.

When you wake up, everyone wakes up.

You and I are part of the Government of ourselves. And the result of the economy depends on all our respective contributions to the society.

Don't expect the Ignorantly Selfish Government of Nigeria to suddenly become Good Leaders that they never will be if we do not take actions but continue to nag about their undoings and misdeeds.

Naughtysite:


Your write up is 8 April, 2019.

First paragraph also said they were working to reduce the production cost per barrel to $15 as at April last year.

it is not my writeup