Nigeria has decided to reduce its capital budget for joint venture oil operations by 40 per cent this year to $8.1 billion due to the slump in crude oil prices, sources at the Nigerian National Petroleum Corporation (NNPC) revealed on Monday.
An NNPC source was quoted by Platts, a US-based publication that provides information on energy and metals data that, the NNPC has informed the joint venture partners that this year’s capital expenditures will be cut down by 40% from the initial proposed budget of $13.5 billion,” The source reported that “$13.5 billion was the level that has been maintained in the past three years, but because of the drastic decline in oil prices that level cannot be sustained this year. Officials of the international oil companies also confirmed receiving NNPC directives on the budget cut.
The Nigerian government had Initially proposed N1.22 trillion ($7.5 billion) to fund its share of the oil joint venture operations this year, with foreign oil firms providing $6 billion.
“But since this budget was agreed in the last quarter of 2014, there have been drastic changes in the parameters considered by the partners,” another NNPC source said.
“Oil prices have fallen sharply to around $50 per barrel from $80/b when the joint venture budget was prepared, while general growth in the Nigerian economy has declined to below 6 per cent from 6.3 per cent,” the source said.
“Even though the directive is for joint venture operations, it is generally expected. Oil companies have themselves been revising down their budgets in the light of the oil price slump,” an official said.
NNPC chief executive, Joseph Dawha, last month hinted that three deepwater offshore oil projects and one shallow water oil field were at risk of being delayed or cancelled outright because of the decline in oil prices.
Meanwhile in a data released by National Bureau of Statistics (NBS) on Sunday, Nigeria’s oil output declined to 2.15 million b/d at the end of 2014 from 2.26 million b/d at the beginning of the year. The Oil revenue has also declined to N2.3 trillion ($13 billion) from N2.6 trillion, as the decline in oil prices took its toll on export earnings, the agency said.
