Ejiofor Alike with agency reports
The Minister of State for Petroleum, Dr. Ibe Kachikwu, has stated that the members of the Organisation of the Petroleum Exporting Countries (OPEC) must lower the costs of oil production to compete better with shale producers.
Speaking yesterday in an interview with CNBC Africa, Kachikwu said he was confident that an output reduction agreement agreed in November would see oil prices hold.
Eleven of OPEC’s 13 members along with 11 non-OPEC countries agreed to make cuts for the first half of 2017.
Nigeria and Libya were exempted due to production setbacks suffered last year.
“OPEC members must lower production costs to compete better with shale producers,” Reuters quoted Kachikwu as saying in a tweet on CNBC Africa’s Twitter feed.
Kachikwu said he was “impressed with the work OPEC has done” and “confident prices will hold.”
According to him, “What is more fundamental is what OPEC countries can begin to do for themselves in term of costs, diversification,” he added.
The November 30, 2016 agreement to cut production prompted oil prices to rise $10 a barrel, although they have been trading in a narrow $3 range in the last few weeks.
But analysts say that a revival in US shale production is likely to limit any major price recovery in crude oil.
Though the shale producers are flooding the global market, they cannot withstand low oil price as a result of the high cost of production of shale.
Saudi Arabia and her Gulf allies had initially opposed the agitation by the poorer members of OPEC for production cuts to avoid losing market share and also to force the high cost Shale producers out of the global oil market.
Kachikwu had earlier said his tenure would work hard to reduce the cost of crude production.
The minister had told stakeholders at the National Oil Policy and National Gas Policy consultative forum that there was no luxury of time, hence the stakeholders need to key into “the supersonic speed” the ministry of petroleum is moving with because the policies should have been on ground.
“These things should have been on ground yesterday. A lot of things happening in the industry for so long that it is been taken as a norm.
“If we have these policies in legislation, activities can be regulated. We still produce crude at $27 per barrel and sell at $40. We have to bring it below $18. No serious nation will do that and make profit. Refineries will have to work. If time goes by and Dangote refinery begins, we will have scraps,’’ he added.
