Right before Iran decides to unleash its 30 million barrels stock
pile of crude oil into an already supply saturated oil market which will
further crash oil prices, Nigeria has a year or perhaps 5 years to avoid a
major catastrophe.
Iran, a founding
member of OPEC, with oil reserves in excess of 157 billion barrels (fourth
largest crude reserve) and exports about 2.8 million barrels per day, has the potential
to add 1 million barrels of oil per day to global supply in 6 months. Most
recently, the success of the nuclear deal with world powers to curb its nuclear
programme in exchange for lifting sanctions has made Iran’s business atmosphere
highly adventurous and the country now targets about 50 oil and gas projects
worth $185 billion by 2020. The sanctions are unlikely to be removed until next
year since the deal requires approval from U.S. Congress and Nuclear Inspectors
need to confirm Iran’s compliance with terms of the deal.
Iran is actively seeking businesses and investments to
rebuild its core industries and trade links especially from Europe and Central Asia
and has already approved more than $2 billion of projects in foreign investment
licenses and protections. OPEC has since
refused to cut production quota of its members in favor of market share thereby
allowing oil prices to plummet and settle at the right price dictated by the
laws of demand and supply. In an Oil and Gas report published by GTI Securities
Research in May 2015, the Analyst says oil prices will likely hover around $70
in the medium term as demand from developing countries for oil is expected to moderately
match supply.
Nigeria is concerned about its revenue stream and demand
security as discussed at the NSE CEO Roundtable with Bloomberg in June 2015. At
the heart of Nigeria’s future is oil prices coupled with the need to leverage
on the cash flow from this industry to diversify the economy. Nigeria’s newly
elected president is on a corruption curbing exercise which might take a longer
time to resolve before Iran starts exporting at full potential (historical 6
million barrels per day) thereby increasing the competition for Asian customers
among OPEC members and global suppliers.
While Iran can smile with a larger face in few months, Nigeria can take premature refuge in the bigger outlook for oil prices of $100 by 2020.
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