The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has said the Federal government adopted a lower oil benchmark price of $57 per barrel for the 2020 budget as against the $60 per barrel in the 2019 budget because of the expected oil glut in 2020, as well as the need to cushion against unexpected price shock.
Ahmed, at a budget breakdown yesterday in Abuja, said there were strong indications of an oversupplied oil market in 2020, adding that all three of the major forecasters – including the Organisation of the Petroleum Exporting Countries (OPEC), International Energy Association (IEA) and the US Energy Information Administration (EIA) had predicted non-OPEC production growing by about two million barrels per day (mbpd) in 2019 and by more next year.
She spoke on the day oil prices fell more than two per cent as scant details about the first phase of a trade deal between the United States and China undercut optimism over continued tension between the two countries that had helped lift crude markets by three per cent at the end of last week.
According to the minister, the US shale oil accounts for most of the total supply increase, adding also that new projects in Norway, Brazil and Australia will also contribute to the increase in non-OPEC supply. She said market sentiments did not support an expansion in demand, adding that growth in demand for OPEC oil and condensates specifically were projected to slow down next year.
Ahmed added that oil production volume is projected to average 2.18 million barrels per day for 2020, even lower than the projected oil production volume of 2.3mbpd for 2019. “We believe that this is a more realistic projection. For 2021 and 2022, the projections are 2.22mbpd and 2.36mbpd respectively. Actual daily crude oil production and exports have been below budget projections since 2013, despite installed capacity of up to 2.5mbpd, for a number of reasons.
“For 2018, actual production
was 1.84mbpd and for the first half of 2019 it was 1.86mbpd (base production).”
On the key assumptions of the 2020 budget framework, the minister said the real
GDP growth projections are 2.93 per cent, 3.35 per cent and 3.85 per cent for
2020, 2021 and 2022, respectively. She said even though this fell short of the
ERGP projection, the trajectory remained in the right direction.
- Media Report