20 October 2015, Lagos – Despite the free fall in global oil prices, Federal Government has insisted that it would not indulge in the current market share war like the Arabs are doing by offering huge discounts, or grant longer term credit to consumers to boost revenue drive.
Rather, government said, it would become more aggressive with its crude marketing by wooing Asian refiners, especially in India and China, to take up more volumes of Nigeria’s crude through long term contracts.
The development comes even as Iran, Organization of Petroleum Exporting Countries, OPEC’s fourth largest producer prepares to re-launch its crude into the global market after decades of economic sanctions by the US and other world economies, while pleading with other producers to cut back production.
Group Managing Director, Nigerian National Petroleum Corporation, NNPC, Dr. Ibe Kachikwu, in response to Vanguard’s enquiry at a recent interactive meeting, said: “I am not going to sell Nigeria’s crude through discounts.
“Obviously, I am going to do that through a clean approach to selecting crude lifters.
“We need to reach to, for example refineries in India, China, who are looking for huge volumes of crude to enable them face their production and to the extent that you can have a consistent pull out of those off-takers. That is the kind of aggressive marketing we are looking at.
“Once you do that and if for example, the refineries, the big players and local ones are all involved in things that are transparent and not brief case carrying crude lifters, what you find is that long term contracts will make sense.”
To remain competitive in the face of the price war by the Arab producers, experts advised Nigeria to either offer longer term credit for its crude to consuming nations or reach out to big refineries for long term contract. The latter appeared more favourable.
As oil price continues to slide, trading 2.3 percent lower to $46.62 on yesterday, Iran’s Oil Minister, Mr. Bijan Zanganeh, urged OPEC member-states to cut crude output to boost prices to a range of $70 to $80 a barrel, even as his country prepares to ramp up production in the aftermath of economic sanctions.
Market analysts blamed the oil price fall on pressure in part by comments from Iran’s oil minister on Monday that he expects the country to boost production by 500,000 barrels a day in the coming months.
If Iran succeeds in its push, Nigeria, a mono-product oil dependent country, will be the happier for it, as oil prices above $70/barrel is well above its 2015 budget benchmark of $65/barrel.
The benchmark was only sealed after three revisions downward, following a panic-filled period in late 2014, where oil prices fell by more than 40 percent.
Former Finance Minister, Dr. Ngozi Okonjo-Iweala, had defended that the benchmark was a conservative one, saying “the N4.3 trillion budget is based on a benchmark oil price of $65 a barrel, down from $77.50 this year, and a significant cut on previous budgets.”
However, with oil prices still on a free-fall, such assertion was met with more criticisms from experts, who clamoured for a lower benchmark prior to the presentation.