In its latest report, OPEC said production would fall to 29.6million barrels per day bpd, 300,000 barrels and 2.6 per cent lesser than its current production of 30 million bpd.
It said OPEC’s decision was informed by the need to maintain production levels that keep price from falling below $100 a barrel.
President, Nigerian Association of Energy Economics, Prof Adeola Adenikinju, said OPEC’s proposed cut would affect member-countries. He said any attempt to keep oil production or price below or above certain thresholds would affect OPEC members.
He said Nigeria’s case is peculiar because its oil production and revenue have been declining.
‘The issue is going to have marginal effects on Nigeria’s oil output. This is because the country is not new to declining oil production. Besides, the fact that Nigeria is not meeting OPEC quota of 2.5million barrels or thereabout, oil production has been hindered by issues, such as oil theft and pipeline vandalism, divestments of stakes by oil majors, among others. Based on these, the sliding oil production will have minimal effects on Nigeria,” he said.
“The impacts would be much on revenue. The budget is predicated on oil production. Once there is a problem with oil production, it would affect fiscal flow of the government. It is obvious that Nigeria cannot meet the current or future quota because it has too many internal problems to contend with. This means the country will further experience shortfall in oil revenue.”
He noted that the government benchmarked the budgets at 2.5million barrels a day and $90 barrel but the country is producing less than 2million barrels a day.
‘The government is already having problem with the budget. The oil projection of 2.5million
barrels has not been met, which means that that the government is battling fiscal challenges. The government thought it would be able to boost the Excess Crude Account to mitigate the effects of any shortfall in oil revenues, but that has not happened. Giving the probelms in the Niger Delta oil producing region, the country would still not be able to increase its oil production and revenue next year.
Also, the Chief Executive officer, Economic Associates, Dr Ayodele Teriba said any major development in the international oil market would have ripple effects on the economy of OPEC’s member countries.
He said the government’s inability to meet some of its fiscal needs was as a result of some failed projections. He advised the government to put in place measures that would mitigate any external shocks.
Meanwhile, crude oil production, including condensates and natural gas liquids, fell by 1.5 per cent from 1.97million barrel per day in April to 1.94 mbd in May, this year.
According to the Central Bank of Nigeria’s (CBN)’s Economic report, deliveries to the refineries for domestic consumption remained at 0.45million barrels a day or 13.9 millions in the period under review. CBN attributed the decrease in production to recurring oil spills, crude oil theft and force majure on oil activities in Niger Delta.
Information from the Nation was used in this report.