Nigeria Faces Likely Oil Output Drop As Exxon Suspends Exports

Gas-flaring_Niger-delta_NigeriaU.S. oil major, Exxon Mobil Corp, says it has suspended exports from Nigeria’s top crude stream.

The suspension has added to economic strains from renewed activities of militants in the Niger Delta region that have cut production to its lowest in decades.

Reuters quoted Exxon Mobil as saying on Friday that it had declared a force majeure – a suspension of deliveries because of events beyond its control – on Nigeria’s Qua Iboe crude oil grade BFO-QUA, and that a portion of production had been curtailed after a drilling rig damaged a pipeline.

Last week, Chevron’s platform in the Delta was attacked by militants.

The outages adds to production problems at two of the other largest crude streams, Bonny Light and Forcados, which have already taken Nigeria’s output to a 22-year low.

Royal Dutch Shell shut a major pipeline earlier this week and declared force majeure on Bonny Light crude exports on Wednesday, while an attack in February on a pipeline also caused it to shut the 250,000 barrels per day Forcados export terminal.

Nigeria’s oil production has fallen to 1.65 million barrels per day (bpd) due to militant attacks, Finance Minister Kemi Adeosun, said on Friday, from 2.2 million bpd.

According to Reuters calculations, if outages at Qua Iboe and other streams are prolonged, Nigerian output could fall to around 1.2 million bpd.

This would be the lowest output since 1970, according to BP’s statistical review.

Nigeria had been Africa’s largest crude exporter with its economy heavily reliant on oil up until this year, when rampant oil theft and corruption has kept production well below capacity.

As a result, Angola has overtaken Nigeria as the continent’s largest producer since March, according to OPEC figures.

Nigeria Considers Chinese Panda Bond To Plug Deficit

Kemi Adeosun Minister of finance
Minister of Finance, Kemi Adeosun, says there is a there’s the possibility of doing a yen-denominated bond

The Nigerian government says it is considering the possibility of issuing Chinese panda bond to make up for the deficit in the 2016 budget.

Addressing reporters after a breakfast meeting with the business and investment community early on Saturday in Lagos, Nigeria’s commercial city, Finance Minister Kemi Adeosun said the government’s objective was to borrow the cheapest possible money.

The breakfast meeting focused on the imperatives for fiscal discipline, investment and diversification of the domestic economy in the face of strong local and international headwinds such as the steady decline in oil prices and weak global economic growth.

She told reporters that the government had realised the possibility of issuing a panda bond, which she said would be cheaper than issuing a Euro denominated bond.

“The opportunity now, with the renminbi being a reserve currency, we are looking obviously at the lowest cost of funds to fund our budget deficit. Initially we were looking simply at the eurobond but then we began to explore opportunities in the renminbi market so there is a possibility of issuing a panda bond.

“We began to explore that opportunity. What we are finding is that indicatively, that will be cheaper for us.

“We are just exploring that option at the moment. We have not made any move,” she said.

Mrs Adeosun further stressed that the borrowing size was defined and that the government would not increase the volume of the bond.

“We are just simply shopping around for the best deals and where interest rates are low,” she stated, also hinting of possible consideration of a Samurai, a Japanese bond.

As part of efforts to explore the possibility of a Chinese bond, President Muhammadu Buhari will leave for China on Sunday for a working visit.

The President plans to secure greater support from Beijing for the development of Nigeria’s infrastructure, especially in the power, roads, railways, aviation, water supply and housing sectors.