Ibe Kachikwu, minister of state for petroleum resources, says Nigeria is producing a barrel of crude oil at an average of $13 per barrel onshore and will still make profits even if oil drops to $20 dollars.
Kachikwu said the price of crude oil may not improve in the first half of the year, and may need to get worse to get better.
“First half of the year not likely to see much of a difference, but the latter half of the year, I think we are going to see the impact of dwindling production out of Shale,” he told Bloomberg in Davos, Switzerland.
“We would have taken in the Iranian impact. You’re going to see a natural decline of almost a million barrels by virtue of non-investment. I personally don’t think it would get into the $50s in 2016, in 2017 potentially.
“At the end of the day, the excess stock would have to get out. A lot of that excess stock is not necessarily OPEC stock. OPEC has 1.5 million barrels of that but a good 2million barrels of non-OPEC stock is still sitting out there.”
He said OPEC remains relevant, not necessarily as a price fixer, but as the one to drive market trends, “that’s why everyone wants to talk to OPEC”. He said Nigeria has not “suffered too badly in terms of investments, as most of the projects we have are still on track”.
“The deep off-shore projects, obviously we are putting on hold, given the fact that the returns on those, would not match the prices today.
“Everybody is sort of coming back on land so this is time to put a lot of investments on ground, put a lot of incentives on ground, make everybody return on ground, where in fact our average cost of production is about $13 per barrel.
“So we need more on that, bringing those numbers down from $13 to somewhere $10, obviously we won’t get the Saudi figures of about $6 or $7, but at least get it much lower.”
He added that everyone all over the global oil market is hurting, with investments losses hitting record highs. “I think everybody is hurting, nobody expects these sort of numbers. The Russians are pumping, they are also suffering, at some point we realise that countries don’t make investments in oil, companies make investments.
“The question is: at what prices would companies continue to make investments? Already, we are seeing projections of loss of 1.8 trillion in this sector over the next five years.”