A fresh attack on the Trans-Niger Pipeline (TNP) may have put the country?s 2017 budget of N7.2 trillion on tenterhooks.
Suspected militants had on Monday, vandalised the TNP in Ogoniland in the Niger Delta region, reducing the Nigerian National Petroleum Corporation?s (NNPC)?s crude oil production by 150,000 barrels per day (bpd).
The 150,000bpd reduction translates to $7.5 million daily at the current market price of $50 per barrel. When multiplied by the official exchange rate of N360 to the United States dollar, the nation would be losing a whopping N2.7 billion daily revenue.
According to the Group Managing Director, NNPC, Dr. Maikanti Baru, the country has not been able to sustain the recent gains recorded in crude oil production as a result of the rupturing of pipelines in the region.
Asked if the Corporation had been able to sustain the 2.2 million bpd crude production it announced last week, Baru told journalists in Abuja that, ?unfortunately, we have not been able to sustain it because we have challenges.
?As I am talking to you, this morning (Monday), the TNP has been breached in Ogoniland and that is 150,000 barrels of oil that have been knocked off. That has been fairly an issue with that area. We hope we can continue our dialogue and things will return to what they should be.?
The NNPC boss told stakeholders in Abuja last week that the country?s crude production was 2.2 million bpd.
Baru, who spoke through the Corporation?s Chief Operating Officer, Gas and Power, Mr. Saidu Mohammed, announced that the country?s crude production was building up.
?We are doing about 2.2 million bpd today but, of course, the intention is to build on that, sustain production and grow it up to three million bpd in the next few years,? the GMD had said.
But Shell, in a statement on Monday, said its Nigerian subsidiary ? Shell Petroleum Development Corporation (SPDC) ? has shut the TNP in Nigeria due to a leak, effectively shutting in exports of Bonny Light crude oil.
SPDC said it shut the pipeline on July 21 after a leak at B-Dere, Ogoniland, stressing it did not yet know the cause of the leak.
Shell declared force majeure on Bonny Light exports earlier this month after the closure of the Nembe Creek Trunk Line by operator, Aiteo, the only other export avenue, but until last week, loadings continued via the TNP.
August exports of Bonny Light had originally been planned at more than 200,000 bpd.
SPDC said efforts are ongoing for a joint investigation visit to determine the cause of the leak and repair of the pipeline.
Commenting on the implication of the shut TNP to the 2017 budget, an energy expert and Partner, Bloomfield Practice, Mr. Ayodele Oni, said the damage to the TNP is likely to have a minor negative effect on Nigeria?s budget implementation.
??This is because, as a result of the damage, crude oil output has dropped by 150,000bpd and considering the cost of repairs and remediation, it is likely that both crude allocation to the Federal Government, as well as royalty, will take a dip till the pipeline becomes operational again.
However, it is likely that the effect will be manageable on the budget, nonetheless.
Conversely, this damage is likely to bring Nigeria significantly closer to its production cap under the Organisation of Petroleum Exporting Countries (OPEC) as before the attack crude production was around 2.2 million bpd, whereas OPEC has imposed a cap of 1.8 million barrels per day,? he said.
Meanwhile, oil rose around 3 per cent on Tuesday, a day after US oil producer, Anadarko, said it would cut capital spending plans and Saudi Arabia vowed to reduce crude exports to help curb global oversupply.
Brent crude futures rose $1.37 or 2.8 per cent to $49.97 a barrel by 12:06pm (1606 GMT). US West Texas Intermediate futures rose $1.39 or 3 per cent to $47.73 a barrel and by 5.50pm, the price had hit $50.03 per barrel.
Lower oil prices in June and July may be affecting US shale production, said Mark Watkins, Regional Investment Manager at US Bank.
?Companies are not drilling as fast as they had been in the beginning of 2017,? he said. ?They?re not producing as much because it?s much less profitable with prices in the low $40s.?
On Monday, Anadarko Petroleum Corp posted a larger-than-expected quarterly loss and said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major US oil producer to do so.
Earlier, Halliburton?s Executive Chairman said growth in North America?s rig count was ?showing signs of plateauing. In the US, investors have been waiting to see where that top is in oil production,? Watkins said, adding ?we?ve hit a tension point.?
At a meeting of the OPEC and non-OPEC producers on Monday in St. Petersburg, Russia, Saudi Arabian Energy Minister, Khalid al-Falih, said his country would limit crude exports to 6.6 million bpd in August, down almost 1 million bpd from a year earlier.
Nigeria agreed to join the deal by capping or cutting its output from 1.8 million bpd once it stabilises at that level.
OPEC said stocks held by industrial nations had fallen by 90 million barrels in the first six months of the year but were still 250 million barrels above the five-year average, which is the target level for OPEC and non-OPEC members.