NNPC, 2019 Budget And Baru’s Optimism

By Promise Ating It was not the first time the Group Managing Director of the Nigeria National Petroleum Corporation, NNPC, had been upbeat about developments in the country’s oil sector in the last three years. But when he told senators recently that Nigeria would meet the oil production target of 2.3 million barrels of oil per day benchmark used in the 2019 budget, he portrayed a sector that is on a rising curve of growth. Baru, who stated this while appearing before the Senate committee on Finance, disclosed that the corporation had installed oil production capacity of over 2.5 Mbopd to support the yardstick used in 2019 budget. Baru, who was represented by NNPC’s Group General Manager, Corporate Planning and Strategy, Mr Bala Wunti, identified the major obstacle to achieving the planned production volume as the security situation in the Niger Delta region, which he said had seen considerable improvement. He stressed that Federal Government’s initiative for collaboration and effective community engagement “for sustainable partnership” has significantly helped to douse the security challenge in the region. He further disclosed that the improved security situation in the Niger Delta has led to a corresponding improvement in crude oil production under the current administration, adding that the “NNPC remains confident that Nigeria can achieve the 2019 budget production target of 2.3 Mbopd.” The GMD further disclosed that the NNPC mandates on the 2019 Medium Term Expenditure Framework, MTEF, are premised on the 3 thematic assumptions of Production volume, Crude oil price and Unit Cost of Crude Oil Production. He also revealed that the Corporation, in collaboration with other relevant agencies have emplaced measures to ensure the attainment of these assumptions used in developing the 2019 MTEF. This is indeed gratifying news from Nigeria’s oil corporation at a time when even the most optimistic analysts had urged caution. In recent times, the performance of the capital expenditure component of the annual budgets has been strenuous due to shortfall in expected revenue to cumbersome procurement process. These challenges were aggravated by late passage of appropriation bills into law. The passage of the 2019 budget, like the ones before it, would also be coming in the second quarter of the year, thus raising apprehension about overall performance. And especially implementation of the capital component. The 2019 budget is predicated on a benchmark oil price of US$60 per barrel, oil production estimate of 2.3 million barrels per day and an exchange rate of N305 to one US dollar. Based on these assumptions, total revenue of N6.97tn is projected to fund aggregate expenditure of N8.83 trillion. The oil price benchmark, seen as too optimistic, is a source of worry and experts have urged caution in the approach to oil revenue projection, bearing in mind that the international crude oil market is highly volatile. More importantly, the 2019 budget appears to lean more on oil revenue projected at N3.73tn than non-oil revenue estimated at N1.39tn. This leaves the economy vulnerable to not only external shocks but also to volatility in the Niger Delta region. But the remarks coming from those at the helm of affairs at the NNPC about current status of oil production and on-going collaborative efforts is more than reassuring. At several fora where the NNPC chief had spoken inside and outside the country, he had told the world the effort of the Nigerian government in turning the oil industry around. Recently at Doha, Qartar, Baru told the world the transformation in Nigeria’s oil and gas sector and how Africa could become an economic hug through investments in natural gas.Dr. Baru, who was represented at the event by the NNPC Chief Operating Officer, Gas & Power, Engr. Saidu Mohammed, revealed that 93% of current natural gas production in Africa is being produced by Members of the Gas Exporting Countries Forum, thereby making it imperative that efforts be intensified for in – continent conversion that will ensure value addition to natural gas for economic growth and development of the continent. On developments in Nigeria, he stated: “Today, our focus in Nigeria is to deliberately ensure that our Natural gas development efforts meet our twin objective of export and domestic supply. Our thematic focus areas for natural gas development is to ensure that we meet our Gas to Power targets, Gas based Industrialization aspirations as well as supply to the export market and we are aggressively pursuing some big-ticket projects in that regard,” he revealed. He also spoke on some critical gas development projects in Nigeria including, The NLNG Train 7 project, the Gas Flare Commercialization Project and the Deep-water Non-Associated Gas Development Projects, which he described as “big bang” initiatives being aggressively pursued to usher in new developments for Nigeria’s gas sector and expand the nation’s economy. Peace in the Niger Delta is fundamental to the performance of the 2019 budget since oil production is still the highest revenue earner for the country, despite marginal improvement in the non-oil sector. This is why it is gratifying to learn that there is a collaborative partnership for peace between the federal government and groups in the region. There is no doubt that the relative tranquility in the region in recent times is a result of this effort, which is boosted by NNPC’s own engagement of oil communities for sustainable peace and development. These efforts must be sustained by the federal government and all stakeholders in the Niger Delta. This was acknowledged recently when the Chief Operating Officer, Upstream, Eni, Mr. Antonio Vella, led the management team of the Nigerian Agip Oil Company (NAOC) on a courtesy visit to the GMD of the NNPC in Abuja. The oil company commended the federal government and NNPC for the improved security situation in the Niger Delta which has rubbed off positively on the operations of international oil companies. Mr. Vella said the prevailing peace and security in the region had increased investors’ confidence in Nigeria’s petroleum industry, adding that his company was considering doubling its investment in the country. “The steps the GMD has taken have greatly improved security in our area of operations, that is very important to us as it has given us confidence to come back strongly and raise oil and gas production. And that is what we are doing, we are increasing our budget in Nigeria because we have confidence in Dr. Baru and the entire system”, he said. This is a piece of good news!.