OPEC Pressure: Why Nigeria Won’t Cut Production Yet
Nigeria is likely to come under immense pressure from the Organisation of the Petroleum Exporting Countries, OPEC, this month to cut its crude oil production in line with the organisation’s current policy aimed at stabilising oil prices.
OPEC late last year cut its output for the first half of this year by 1.8 million barrels per day, mb/d, with effect from January, rolling this over at a meeting in June to March next year.
Nigeria and Libya were exempted from the output cuts on the ground that their production were then recovering from the impact of militancy, which had led to stalled production.
But indications are that Nigeria would likely come under pressure to join the production cuts at a meeting of the OPEC Joint Ministerial Monitoring Committee in Vienna, Austria on September 22.
Indeed, a letter from the Joint Ministerial Monitoring Committee, which oversees implementation of the cuts, has reached the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, inviting him to the meeting.
Sources said Kachikwu would be expected to brief the meeting on the Nigerian production situation, but added that Nigeria might be invited through him to join the production cuts.
OPEC insiders said there is already subtle manoeuvring among some of the OPEC member nations to see that Nigeria joins in the cuts.
Those calling for Nigeria’s inclusion in the production cuts cite the country’s growing oil production and exports in the last few months, particularly in July when the country’s crude oil production crossed 1.8 million barrels per day.
But, sources also said it would be difficult to get Nigeria to join in the cuts because of the strength of the agreement that led to Nigeria being exempted in the first place.
“It would be a blunder for the minister to accept to a cut in Nigeria’s production (at the September 22 meeting). Nigeria has a strong case and it should not allow itself to be pushed into joining the OPEC cuts,” an analyst, who understands the politics of OPEC, told SweetcudeReports.
SweetcrudeReports gathered that the agreement that exempted Nigeria is that it would remain exempted until its output reached 1.8mb/d and that until that happens and there is stability in production, Nigeria would not likely join the production cuts.
Giving a background to the OPEC cuts and current agitation for Nigeria to join the implementation of the cut, another source said: “The agreement was that OPEC should not exceed 32mb/d. Nigeria and Libya were exempted to allow them recover from their low outputs, Nigeria because of the Niger Delta militancy.
“By March/April, Nigeria’s production went up to 1.5mb/d. Global production increased and prices began to go down. Some countries began to ask if Nigeria should not be brought into the cuts.
“At the May 2017 (OPEC Ministerial Council) meeting, it was not an issue. It was not an issue because Nigeria’s May production, according to OPEC, was under 1.5mb/d”.
“Nigeria’s production, however, climbed to 1.8mb/d in July, prompting the agitation for the country to be included in the cuts”.
The source stated that during the OPEC Technical Committee in July, Nigeria was invited alongside Libya for the two countries to review their production and explore the possibility of having them join the cuts.
“By July 1, we exceeded 1.8 mb/d. We did 1.8mb/d to 1.82mb/d for eight days. But just before the meeting (of the Technical Committee), production fell to below 1.5mb/d.
“Our argument at that meeting was that the country should be given time to get back to 1.8mb/d and 2-3 months to stabilise,” he added.
The source also asserted that even if Nigeria attained the desired level of production, it would still not likely join the cuts till next year.
He noted that with the extension of the OPEC production cuts till March next year, Nigeria is equally exempted from joining in the cuts till that time.
“The agreement is that Nigeria should be exempted till the second quarter of next year, and we are not going to allow anybody to push us into accepting to change that agreement,” the source further stated.