Ranks fourth on OPEC’s list
•Experts warn FG on new Deep Offshore Act
Babajide Okeowo
Nigeria raked in a whopping N1.6 trillion from crude oil exports in 2018 ranking fourth on The Organisation of the Petroleum Exporting Countries, OPEC’s list of highest-earning countries in the group.
Statistics from OPEC’s World Oil Outlook, WOO 2019, showed that Nigeria which earned $67 billion as far back as 2010, dropped to $54b (N1.6tr0 by 2018, contributing 31.3 percent to Gross Domestic Product, GDP in that year.
This trend of lesser revenue from the product last year wasn’t peculiar to Nigeria, as most OPEC members also witnessed a drop in earnings.
On the second position in the United Arab Emirates, UAE with $74.9b, Iraq made $68.2b while Iran in the third-place earned $60.2b in 2018.
OPEC currently exports about 29 million barrels per day but as a percentage of the global total, the level has dropped. In 1990, crude oil and petroleum product exports of OPEC member countries constituted more than 44% of the global total, whereas, in 2018, the figure was about 38%.
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Oil rents also correspond to an average of about 21% of OPEC economies’ GDP; with export revenues from oil being estimated at a level of almost $650 billion in 2018.
In another development, experts have warned that the newly signed law to govern deep offshore oil operations is a disincentive to investment in the deep-water and is capable of further eroding Nigeria’s global competitiveness.
According to Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry which groups all the oil majors in Nigeria, the amendment is “a disincentive to investment in the deep-water and it is further eroding Nigeria’s global competitiveness. This rate increase would result in future deep-water projects becoming economically unviable and leading to at least a $15 billion reduction in planned near-term investments, and a 20% decline in deep-water production by 2023” the group said.
Similarly, OluwabusolaJeje, an analyst at United Capital Plc. believes the bill will discourage new investment.
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“We believe this bill will discourage new investments, as well as delay final investment decisions on pending offshore projects. Considering the volatile nature of crude prices, we could see new capital inflows directed toward countries with better fiscal terms and less regulatory uncertainty” he said.
Recall that the bill has set a record for the fastest bill so far passed under President Muhammadu Buhari. It was first presented to lawmakers on October 2, 2019, it went through Parliament within two weeks before returning for Buhari’s signature, which he appended on November 4, 2019. In fact, it had to be flown to the president in London to be signed.
Under the new regulations, energy producers that pump about 80% of Nigeria’s crude will now pay levies for fields where they previously paid none. The measure will add at least $1.5 billion to the treasury next year, according to Senate leader Ahmed Lawan. These will come from a 10% royalty on output from water depths starting at 200 meters and from a price-based system that compels producers to pay extra rates between 2.5% and 10%, which could see payments potentially reaching 30%, depending on crude prices.
