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Rising Oil Prices Worry FG, Says Nigeria Not Gaining from Soaring Rates

The federal government yesterday expressed concern over the rising international prices of crude oil, saying the increase is not good for the country.

The government bemoaned waning foreign investment in the oil and gas sector, and reiterated the need to float an African Energy Bank to curb the continent’s dependence on Europe, Asia and America for funding.

Also, Nigerian National Petroleum Company (NNPC) Limited released details of how it distributed a total of 387.59 million litres of petrol in the last one week to bridge the gap caused by the withdrawal of methanol-blended products in circulation.

This was as the House of Representatives Committee on Downstream investigating the importation of off-spec premium motor spirit (PMS) grilled other importers and suppliers of the product.

Speaking on the rising crude oil prices in an interview with Bloomberg Television, Minister of State for Petroleum Resources, Mr. Timipre Sylva, maintained that Nigeria’s comfort zone in terms of oil prices was between $70 and $80 per barrel.

Although Sylva did not particularly explain why higher oil prices were bad for Nigeria, he stated that at the moment, Nigeria was not gaining anything from the soaring prices.

On the back of rising tensions between Russia and Ukraine, Brent, Nigeria’s benchmark, on Tuesday hit $99.03, the highest in the last nine years, almost touching the much-talked-about $100.

Clearly, the country’s controversial fuel subsidy regime, which would gulp N3 trillion this year, coupled with its inability to ramp up production to meet the quota allocated by the Organisation of Petroleum Exporting Countries (OPEC) have combined to limit the gains from the oil price hike.

However, Sylva blamed the inability of Nigeria to activate the oil wells it shut down when OPEC instructed producing countries to cut production as well as the lack of investment in the upstream sector for the country’s inability to increase production. At the moment, Nigeria is losing at least 300,000 bpd to its capacity challenges.

The minister stated, “I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping it will come down to somewhere around $70 to $80, which will be sustainable for us to the end of the year.

“We are working hard on that (production increase). What happened to us was the fact that we had to cut back at the time, and, of course, in such a way you can’t really cut back mathematically.

“So, you want to cut back 100,000 barrels that you shut out, maybe we’ll shut down about 200,000 to 300,000 barrels. So at the end of the day, we over-complied because we just couldn’t achieve it mathematically.

“In trying to cut down, we cut down too much. And now to come back, it’s not been easy for us to get the wells back to production.”

The minister noted that a lot of additional investments would be needed to ramp up production, but lamented that foreign funding was drying out for the industry.

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