Crude oil export may dip in 2014 over political tension, oil theft

Oil-TankerInsecurity and brazen oil theft in the Niger Delta region remain the biggest threats to Nigeria’s economy next year, as these may affect the export of crude, which is the mainstay of the economy.

Government’s efforts at curbing oil theft are not having much impact on the activities of the thieves who see the act as an avenue to acquire wealth, some planning to become local war lords in the Niger Delta.

It is feared the situation would be further compounded by political tensions, as 2015 the election year draws near.

The focus on politics next year, industry watchers anticipate, could distract government’s attention from insurgency in the North and oil theft and restiveness in the Niger Delta.

Industry operators say that oil theft is not abating,

contrary to the statements of government.

There are claims that some key agencies and influential individuals are complicit, and that the lure is huge donations from stolen oil money to the political campaigns of some powerful groups and individuals.

This waning attention to the security situation would further lead to decline in oil exports, some industry operators have said.

The country is estimated to be losing over $8 billion to oil theft and supply disruptions a year.

The Executive and the Legislature have been at loggerheads over the what should be the benchmark oil price for the 2014 budget.

While the Executive pegged the bench mark at $74 per barrel, the Senate and the House of Representatives fixed theirs at $76.5 and $79 respectively.

Oil revenues have continued to decline in spite of the relative stability in oil prices and output, when compared with preceding years. This has been attributed to frequent pipeline vandalisation which oil production networks suffered. This has consequently led to several declarations of force majeure by oil companies.

Commenting on this, Eddy Wikina a former external affairs manager with Shell Nigeria Exploration and Production Company (SNEPCO) said government should do everything possible to see that the country’s oil production does not slip to the level of 700 ,0000 barrels per day, as has been the case in the past.

This he said, would not augur well for the economy.

Another person who spoke but does not want his name mentioned, said since 2014 would experience a lot of political activities, it may be dangerous if the president is not re-elected, given the threats coming from some of the militants . “Nigeria’s

economy faces major risks next year from continued declines in oil exports “, he said

The Central Bank of Nigeria (CBN) monetary policy committee said in a statement after its quarterly meeting, that Nigeria’s oil windfall savings

have fallen sharply to less than $5 billion as of November 14, from $11.5 billion at the end of 2012, following the government’s massive withdrawal to augment lower oil revenues this year.

“Clearly, the major risk on the fiscal side at present is not one of escalation of spending but loss of revenue from oil exports. The outlook for 2014, however, portends some potential headwinds that may lead to further tightening in monetary conditions.”
With spending expected to jump next year, in preparation for 2015 elections, the bank urged the government to ensure it was “blocking fiscal leakages in the oil sector and increasing oil revenues,” in order to build up savings again.

 

[Business Day]

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