Effect of current crude oil price plunge on Nigeria Oil Industry

The steep drop in crude oil prices have put most Nigerian oil companies at risk, with industry experts saying oilfield shutdowns and job losses are imminent.

The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, last month, put the cost of crude oil production in the country within the range of $15 to $17 per barrel.

The global oil benchmark, Brent crude, fell on Wednesday to as low as $15.98 per barrel, its lowest since June 1999, before rising to $20.87 per barrel as of 6.45pm Nigerian time.

“There is so much oil floating around in tankers that people can pick and choose, and ask for all sorts of discounts. This has serious repercussions for a country like Nigeria. Unfortunately for us, we are in a very nasty situation,” an energy expert and former board member of the NNPC, Alhaji Abdullahi Bukar, said.

Bukar also said some companies might shut the more expensive fields and leave the ones producing at “reasonably low-operating costs” to continue production.

The Chief Executive Officer of International Energy Services Limited, Dr Diran Fawibe, said the security cost and other charges imposed on operators had made the production cost in the country very high.

“So, in order to sustain that production level, the price must be high enough. We may see quite a number of projects being suspended, if not outright cancelled, until the price has gone up to a level where they can justify the economies,” he said.

2020 Nigeria Crude Oil Benchmark

Nigeria has not stopped producing crude oil but a persistent crash in oil prices may lead to a halt in production, the Nigerian National Petroleum Corporation has declared.

Nigeria recently slashed the oil price benchmark for its budget to $30 per barrel from $57 per barrel, but oil prices kept crashing since the outbreak of coronavirus as demand plunged.

On whether Nigeria had stopped oil production due to the persistent price crash, the country’s national oil firm said it had not.

Earlier this month, the Group Managing Director, NNPC, Mele Kyari, said Nigerian crude oil grades were not rejected, although stranded in the market.

Crude oil facts

Crude oil can be 'heavy' or 'light' & 'sweet' or 'sour.'  Sweet/sour refers to sulfur.  Sour crudes are full of sulfur which has to be removed from the oil. 

A refinery is designed around a specific type of crude and can't refine any crude oil.

Especially true about oil from the Bakken; very light.  Because pipelines have become such a political football, Bakken oil is often shipped by rail, where any subsequent derailment can then be catastrophic. The same people protesting against pipelines then rail againt railroadsAs you say; crude oil can be 'heavy' or 'light' & 'sweet' or 'sour.'  Sweet/sour refers to sulfur.  Sour crudes are full of sulfur which has to be removed from the oil. 

Other famously light (and sweet!) crudes - Libya and Nigeria.  Chart from the EIA and is a few years old .  

US Crude Imports

For the week ending April 17, the United States imported 4.9 million b/d of crude oil - that's on par with U.S. crude oil imports back in 1987..