Group Managing director, Nigerian National Corporation, (NNPC), Mr Muhammad Barkindo has presented a vivid implication of the effect of the dwindling price of crude oil in the global market, saying that revenue from crude oil sales can not be sufficient enough to fund the budget.
Barkindo, made the disclosure last week at an interactive session with members of the Senate Committee on Upstream Petroleum, said despite earning a whooping N4.752 trillion (or about $32 billion) in 2008 from sale of crude oil, the nation’s earning for 2009 will drastically fall.He told the law makers that: “the fact that our economy depends almost exclusively on the export of hydrocarbons to these economies that are now in turmoil should trigger an urgent response not only from the National Assembly but from all arms of government and from the industry in particular.”To drive this point home, throughout 2008, NNPC and it joint venture companies had produced an average of 904,000 barrels a day being our equity oil upon which the budget of the country is dependent upon at an average price of $97 from January 2008 to December 2008, meaning that cumulatively for the year 2008, we had realised from oil export alone, an estimated US$32 billion providing to the federal account allocation committee on a monthly bases a whopping amount of about US$2.2 billion when you net out cash calls obligations that also averaged about US$414 million.”In 2009, and, in the budget that you just passed, you had predicated the national budget on a benchmark price of $45 and an average of 2.3 million barrel per day. But Mr. Chairman, just for the month of January that we have verified figures, the monthly lifting of crude oil alone is in the order of 23 million barrels compared to an average of 27 million barrels on monthly basis for the year 2008. In terms of pricing, whereas in 2008, our crude price averaged $97 per barrel, in the year 2009, the average basket is hovering around US$43 leaving us with a price deficit of over 50 per cent compared to last year and lower that the benchmark price of US$45 per barrel.”In terms of the projected deficit that is already emerging, less than a quarter of the year 2009, we have a monthly shortfall of contribution to the federation account in the order of about $1.5 billion compared to the realisable monthly provision to FAAC of $2.27 billion for 2008.”We are aware of factors both domestic as well as international that are responsible for this alarming scenario that is emerging. Of course, prices have nose-dived from the height of $147 that was recorded in the summer of last year to a low of about $35 and now hovering around $50 and $51. We are also aware that our level of production has also fallen as result of a variety of factors mainly the issue of security in the Delta and the issue of funding of cash calls as well as other related constraint including the OPEC quota. “For us in the industry, the issue is the issue of survival, we must begin as a matter of urgency to review the cost profile of our projects to streamline our projects because fundamentally we are spending money including the cash call contributions,’’ he added. Following, Barkindo’s shocking revelations, the Chairman of the committee, Senator Lee Maeba expressed the committee’s willingness to tour the corporation’s facilities in May for on-the-spot appraisal.
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