
Video Player is loading.
OPEC urged to lower production costs to compete with shale
Members of the Organisation of Petroleum Exporting Countries must lower production costs to compete better with shale oil producers.
Thu, 02 Mar 2017 12:00:28 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Nigeria faces challenges in repairing key pipelines and maintaining oil production levels in the Niger Delta region due to past disruptions from militant attacks.
- Legislative reforms, including the passage of the Petroleum Industry Governance Bill, aim to enhance governance and transparency in the oil sector.
- OPEC member countries, including Nigeria, must address high production costs to compete effectively with shale oil producers and sustain oil prices.
Nigeria's oil industry is facing significant challenges as it strives to compete with shale oil producers in the global market. According to Darlak Boney, head of energy research at Ecobank, the country experienced a 12.3% year-on-year shrink in GDP in the fourth quarter of 2016 due to disruptions in oil production caused by militant attacks in the Niger Delta. However, there has been some recovery in recent months, with relative peace in the region leading to increased oil production. Despite these positive developments, challenges remain in repairing key pipelines such as Fokados, which are crucial for maintaining production levels. The Minister of State for Petroleum Resources, Ibe Kachikwu, has expressed optimism that production can reach 2.3 million barrels per day if peace in the Niger Delta is sustained. This target is contingent on the successful repair of damaged infrastructure and the improvement of security measures in the region. In addition to addressing production challenges, Nigeria is also focusing on legislative reforms to enhance governance in the oil industry. The passage of the Petroleum Industry Governance Bill is seen as a key step towards increasing transparency and efficiency in the sector. The bill includes provisions for the establishment of a new regulatory body, the National Petroleum Regulatory Commission, which will consolidate various regulatory functions under one organization. This restructuring is expected to improve investment climate and provide clarity for industry stakeholders. However, concerns remain about the need for OPEC member countries to reduce production costs in order to compete with shale oil producers effectively. The rise of shale production in the US has put pressure on conventional oil producers, including those in Africa, where operational costs are often higher. Bony highlighted the importance of improving cost efficiency to withstand lower oil prices and sustain production levels. Despite the competitive challenges posed by shale producers, there are opportunities for Nigerian oil exports within the African continent and beyond. With the impending completion of projects such as the Dangote refinery, Nigeria aims to meet domestic demand for petroleum products and expand its market reach regionally. Efforts are also underway to secure new markets in countries like India and China, diversifying Nigeria's export destinations. While the US's focus on expanding shale production may impact global oil markets, Bony emphasized that the unique characteristics of shale oil require processing before export, presenting logistical challenges for international trade. As OPEC considers further production cuts to stabilize oil prices, Nigeria remains cautiously optimistic about the outlook for the oil market. The Minister of State for Petroleum Resources anticipates prices to remain around $56 to $57 per barrel, supported by potential supply constraints and market dynamics. While uncertainties persist, the Nigerian oil industry is adapting to meet evolving market conditions and regulatory reforms to enhance competitiveness and sustainability in the face of shale oil competition.