Oil production shortfall threatens 2012 budget.

 by Okechukwu Nnodim.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.

The volume of oil pumped in the second quarter of 2012 fell below the projected volume stipulated in this year’s budget; the Central Bank of Nigeria’s 2012 Q2 report has shown.

According to the CBN, the country pumped 2.12 million barrels per day of oil in Q2, a volume that was  16.98 per cent below  the 2.48 million bpd,  which the government had projected in this year’s budget.

The report, which was published on the bank’s website, noted that oil production had risen from an average of 2.06 million bpd in the first quarter.

“Nigeria’s crude oil production, including condensates and natural gas liquids, was estimated at 2.12 million barrels per day or 192.92 million barrels for the quarter,” the CBN said.

If the current figures by the apex bank are correct, then Nigeria may have to increase its output in the second half of the year to fund all the spending in this year’s budget without taking on more debt or lowering its oil savings rate.

The benchmark oil price in the budget was $72 a barrel, well below the market price and above which Nigeria is supposed to save extra revenues in the Excess Crude Account. But if production fails to meet projections,  government will need to take more money back from the ECA to meet the shortfall.

The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had told Reuters last month that when putting the budget together, her ministry lowered the production projections given to it by the oil ministry.

She had pledged to increase the balance in the ECA to $10bn by the end of the year, from around $7bn now. If oil production figures under-perform, Nigeria could be gambling on prices staying high to meet this pledge.

Reuters reported that the Nigerian National Petroleum Corporation said last month that crude oil production reached an all-time high of 2.7 million bpd.

But industry experts have questioned these figures, which are at the top end of Nigeria’s capacity and come during a period when oil theft by criminal gangs was at record highs.

The CBN’s oil output data usually comes in lower than figures from the NNPC and the oil ministry, who both have an interest in showing progress in the industry’s performance, although they also have the best access to the data.

The Nigerian Bureau of Statistics admitted that its own official figures relied on data provided by the NNPC.

The ECA has been raided frequently by government in recent years. The account contained $20bn before the 2007 general election but hovered around $3-$4bn last year before Okonjo-Iweala began efforts to ramp up savings.