Last Friday’s resolution by the Organisation of Petroleum Exporting Countries (OPEC) to cut 800,000 barrels, or 2.5 per cent of members daily output, will see Nigeria’s daily oil production drop by a minimum of 43,775 barrels, effective January 2019.
The drop is expected to remain in place for an initial six months period until June 2019.
But, a communique at the end of the 175th meeting of the 15-member oil group in Vienna, Austria on Friday said the cut was subject to a review in April 2019.
In the communique, OPEC said the latest cut, which would help stabilise and strengthen crude oil prices at the international oil market, would be based on members’ October oil production levels.
Nigeria has consistently been producing below the 2.3 million barrels daily benchmark in the approved budgets, since 2016.
The latest cut will further reduce the output level by 43,775 barrels, in line with Friday’s resolution.
OPEC’s secretariat production data of member countries contained in the latest monthly oil market report published on Friday showed Nigeria’s daily oil production has maintained a low profile for years.
After Niger Delta militants attacked oil facilities in 2015, cutting the country’s oil production by almost 50 per cent, the capacity has crawled slowly from an average of 1.6 million barrels in 2016 to about 1.7 million barrels in 2017 and 2018.
In September, OPEC’s secretariat secondary sources put Nigeria’s daily production capacity at about 1.768 million barrels, before dropping by about 17,000 barrels to 1.751 million barrels in October.
But, direct communication sources, according to the group’s monthly report, gave the figure as 1.634 million barrels in September, up by about 138,000 barrels to about 1.772 million barrels in October.
Based on Friday’s resolution, which said OPEC’s latest output cut by 2.5 per cent would be based on October production levels, Nigeria’s production is expected to drop by a minimum of 43,775 barrels to about 1.71 million barrels per day, effective January 2019.
Nigeria’s representative in OPEC, Mele Kyari, told PREMIUM TIMES on Saturday there was no reason for Nigerians to worry over the impact of the cut on the country’s oil output projections.
“The OPEC decision to cut the output of members affects only Nigeria’s regular oil production, and not condensate,” Mr Kyari, who is also the general manager, Crude Oil Marketing Division of the Nigerian National Petroleum Corporation (NNPC), said.
Condensates are gas hydrocarbons, often classified as ultra-light oil, extracted in liquid form during the oil drilling process.
Although the exact volume of condensates Nigeria produces remains unknown, NNPC data seen by PREMIUM TIMES revealed it could be as high as 500,000 barrels per day.
The data showed the volume was as high as 511,000 barrels per day in 2011, before dropping to about 398,000 barrels in 2017.
Prior to the crucial meeting in Vienna, which later saw members reach a consensus on the latest cut, Minister of State for Petroleum Resources, Ibe Kachikwu, told Bloomberg how “very difficult” it would be for Nigeria to cut its current daily production capacity.
The minister, however, noted that since it was the consensus by the group to act, to stabilise the market and boost prices, it was important for all members to be seen to be contributing something.
Nigeria got three exemptions from previous output cuts between January 2017 and July 2018, which allowed OPEC bring production and supply to a balance.
OPEC’s decision to cut members output followed reviews of various reports, including those of its Secretary-General, the Joint Ministerial Monitoring Committee (JMMC), the Joint Technical Committee (JTC), the OPEC Secretariat, and the Economic Commission Board.
Although the reports showed a fairly stable market in 2018, projections for 2019 oil supply and demand fundamentals showed a growing imbalance, which required urgent adjustments in its overall output from January.
While demand for OPEC crude oil in 2018 was estimated at 32.6 million barrels per day, about 0.9 million barrels lower than the 2017 level, the 2019 demand forecast is about 31.5 million barrels per day, about 1.1 million barrels below the 2018 estimate.
Other OPEC members will be expected to cut their production volumes as follows: Algeria with October production level at about 1.07 mbpd (26,750 barrels); Angola, 1.457mbpd (36.43 barrels); Congo, 324,000bpd (8,100 barrels), Ecuador, 525,000 (13,125 barrels); Equatorial Guinea, 131,000 bpd (3,275 barrels); Gabon 186,000 bpd (4,650 barrels) and Iran, 3.296 mbpd (82,400 barrels).
Iraq, which produced 4.653 mbpd in October will cut about 116,325 barrels; Kuwait 2,.764mbpd (69,100 barrels); Libya, 1.114 mbpd (27,850 barrels); Saudi Arabia 10.642mbpd (266,050 barrels); United Arab Emirate 3.160 mbpd (81,750 barrels) and Venezuela 1.171 mbpd (29,275 barrels).
Following Qatar’s notice of her intention to withdraw its membership of the group, her 609,000 bpd production figure may not be affected by the latest decision.
In addition to the 800,000 barrels, members of the non-OPEC countries, namely Russia, the United States, China, Mexico, Canada, Norway and Brazil, are expected to cut a total of 400,000 barrels from their output, as part of the agreement with their OPEC allies to stabilize the market.
Meanwhile, the OPEC monthly report also showed Nigeria’s oil rig count increased by one, from 33 in September 2018 to 34 in October, out of a total 568 deployed by OPEC, and 2,355 globally.
Rig count, which depicts the level oil production activities by operators, stood at 30 in 2015; 25 in 2016; 28 in 2017; 32 in the first quarter of 2018; 32 in the second quarter; 34 in the third, and 33 in August 2018.
Source: Premium Times