The Nigerian National Petroleum Corporation (NNPC) has stated that the supply crisis, which has negatively affected the global natural gas market and resulted in rising prices, could cause oil prices to rise by as much as $10 a barrel over the next three to six months.
Since the beginning of the year, the cost of gas has increased by more than 250 percent, with a 70 percent increase in the most recent month alone.
The gas crisis, which may be traced back to supply issues, has caused food shortages in areas of Europe, forced the closure of several energy companies, and caused the price of Liquefied Petroleum Gas (LPG), also known as cooking gas, to rise by more than 100 percent in recent months.
In a monitored conversation shown on Bloomberg Television on Wednesday, the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, stated that the current market distortion might result in a rise in oil prices of at least $10 within the next three to six months.
In contrast to this, oil marketers have linked the hike to the implementation of a 7.5 percent Value Added Tax (VAT) as well as the strengthening of the naira against the dollar.
Despite the fact that Nigeria is the nation’s top gas producer, with a proven reserve of 206 trillion cubic feet (TCF), more than 60% of the country’s domestic gas demands are provided by imports, with the remaining 40% met by domestic production.
Kyari pointed out that the global gas crisis, which has resulted in an increase in gas prices, will cause energy consumers to look for fuel alternatives to natural gas in the near future, which could result in an increase in demand for oil of up to 1 million barrels per day, with an accompanying increase in crude oil prices. Kyari said that the global gas crisis, which has resulted in an increase in gas prices, will cause energy consumers to look for fuel alternatives to natural gas in the near future, which could result in an increase
The NNPC boss said,
“It will absolutely hit crude prices as energy consumers are forced to shift from gas to other fuels. You wouldn’t be very wrong if you said you would see an additional $10 on a barrel maybe three months, maximum six months.’’
He stated that the world is currently facing a potential crisis as a result of a lot of things that were not done correctly last year, including underinvestment in the gas industry.
“The implication of that is that we’re going to see the effect coming up in a year or two maximum. And that will also affect the gas supply all over the globe and, particularly, in Europe.
“That’s going to show up in a number of gas-rich countries and gas supply projects are being stalled, a number of midstream gas projects are being stalled or delayed, and the net effect will be that there will be an impact on pricing coming very shortly.”
He also stated that there was still a visible supply deficit, emphasising that the country’s supply to the Nigeria LNG project has been hampered by a number of issues in recent time.
“There are a number of things going on now to improve on the gas supply. We surely have issues around gas supply to the LNG plant, in particular, and even into the domestic market and the net effect is that you will see some slippages in cargos in 2022 and even in 2021.
“And the implication of that is that you have to do something pretty quickly and we have lost time, we have lost investment and for us, what must happen is a very quick return to a pre-Covid-19 level investment and that, of course, is being adjusted and I know that this is a key challenge for the industry.”
Kyari warned that gas prices could spiral out of control in several jurisdictions, including Nigeria, because gas production is tied to oil production and much of the production is associated with it. He also stated that the Nigerian National Petroleum Corporation (NNPC) was undergoing a transformation that would see it invest more in renewable energy sources in the future.
“We are undergoing a transformation and what this means is that we’re going to lead a company that will become the biggest company in Africa, not just the company that will lead the transition into renewables as we go forward to zero carbon situation.
“And what we have to do is to focus on gas development, as everybody else is doing, and also focus on the reality, which is that you need to go electric and to do this, you need a number of things done as quickly as possible to make this company completely commercial and completely profitable.”
The average price of a 12.5kg cylinder of cooking gas climbed from N6,200 in July 2021 to N7,000 in September 2021, signifying a 13 percent rise in the price of cooking gas.
In September, the Major Oil Marketers Association of Nigeria (MOMAN) organised a protest against the Federal Government’s return of VAT on cooking gas, calling on the federal government to retract its decision and remove the 7.5 percent VAT off the product.
They expressed concern that the levy would impede the adoption of natural gas in the country and would pose a hurdle to the achievement of the government’s “Decade of Gas” ambitions.