There are strong indications that the United States will soon resume buying Nigeria’s crude oil following ongoing talks in this regard between the US and the federal government.
Minister of state for petroleum, Dr Ibe Kachikwu, who gave the indication, stated that despite having diversified into the Asian market and other parts of the world, the federal government is presently in talks with the United States government on the possibility of the latter resuming the purchase of crude oil from Nigeria.
The minister disclosed this while speaking to journalists at the Kaduna airport after undertaking an inspection tour of the Kaduna Refinery and Petrochemical Company (KRPC) on Sunday.
The US, which is presently the world’s largest oil producer following its discovery of shale oil, had stopped purchasing crude oil from Nigeria for a while.
Speaking in response to a question on the fate of the Nigerian/US crude trade following US’ current oil sufficiency, Kachikwu noted that the development is part of the outcome of President Muhammadu Buhari’s visit to the United States.
He said, “Post the president’s visit, there have been overtures from them (US) to say they want to go back to buying very limited quantity of Nigerian oil, partly to support the market, and conversations are still ongoing with that.”
The minister, however, explained that it would be wrong to say that there’s presently zero infusion of Nigerian crude into the US, noting that there are about three oil majors, including ExxonMobil, which are US-based companies that export their share of Nigerian crude into US-based refineries.
He stated that the Nigerian National Petroleum Corporation (NNPC) portion of crude is the one being discussed.
“Let’s realise that about three of the major oil companies are US-based – so realise that 40 per cent of their production goes into the US anyway, so when we keep saying zero infusion of Nigerian oil into the US, it’s not really true.
“They never really stopped because they take their own barrels of the share into their own refineries. What we are talking of is the NNPC portion of the crude which is about 60 or 55 per cent, depending on the share of others; that’s the element we are talking of whether they will continue to buy,” Kachikwu explained.
While admitting that the US’ return to the crude oil sales market will impact prices, he, however, pointed out that the US’ volume of export would be minimal because of its internal consumption and strategic reserves factors.
The minister stated that the US is “strategically reaching out to buy a couple of Saudi Arabia barrels and, in fact, they are open up to buy a couple of Nigerian barrels. So the strategic reserve is key for them; they continue to maintain very strong strategic reserve. But from the financial point of view, sometimes they sell and still buy; the whole idea is that if the prices are cheaper, why sell their own oil, so they buy and use that to fill up their reserves.”
Meanwhile, Kachikwu has stated that the country is targeting the production of daily crude production of 2.5 million barrels by 2016.
He also debunked speculations that Nigeria does not know exactly how much oil it produces amid concerns that the Department of Petroleum Resources (DPR) lacks capacity to ascertain the actual quantity produced.
“That’s not correct; we do know the quantity of oil we produce, and that’s the number we use for our budgeting. I can tell you that we are doing 2.1 million barrels, and I can tell you that I am targeting over 2.2 million for this year and hoping to get to 2.5 million. There are measurements in place,” he affirmed.
Furthermore, as part of efforts to increase local refining capacity, the minister has called on investors to purchase refineries abroad, unbundle them and set them up close to existing refineries in Nigeria to save time, cost and maximise return on investment.
He said: “If you want to build a new refinery, it takes an average of two to five years and investment of between $2bn and $2.5bn. What we are encouraging people to do is to be able to unbundle certain refineries that are all over the world, which the owners have decided not to continue with for economic reasons, come over here, set them up and run them.
“If you are going to do that, it will run down your cost; if you are sharing the same premises, same tank farm, same pipeline and power source, it automatically reduces your cost to around $1bn benchmark because power is a key element of that cost. So it will be quicker and cheaper and your return on investment will be more,” the minister said.