en the high cost of producing a barrel of crude oil in Nigeria, the current market turmoil caused by the coronavirus pandemic and exacerbated by the price war between Saudi Arabia and Russia is taking a huge toll on producers in the country.
“Given the cost of shutting down a well, a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas,” the bank said in an investor note. An energy expert and a former board member of the NNPC, Alhaji Abdullahi Bukar, told our correspondent that producers in Nigeria might have to scale down their operations.
“When you tell someone who is producing 2,000 barrels to cut off 20 per cent of its production, you have damaged him. So, the marginal field operators need to be allowed to produce at whatever level they can, so they can survive,” Bukar added. He said, “The situation is bad enough, but if you shut down, it is not at zero cost. So, do you now shut down and start to incur the costs associated with non-production? If you are producing, even though it is not economical, you may then have a reduced level of production.
A Norwegian consultancy, Rystad Energy, said last week that oil prices could fall as low as $10 a barrel if the economic impact of the coronavirus dents global oil demand by 16 million barrels of oil a day.
This is the real issue not Covid 19...
We are now aheading to dollarless hopefully