Nigeria’s 1.83mbd OPEC quota faces persistent hurdles
The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed last Wednesday to increase crude production by 100,000 barrels per day (bpd) in September, increasing Nigeria’s quota by 0.22%.
According to the new production schedule agreed at a meeting, Africa’s largest producer’s quota for September will be increased to 1.83 million bpd.
However, Nigeria has struggled to meet previous quotas, and the reluctance of international oil companies (IOCs) to invest in the country’s energy sector due to rampant crude theft will see the country struggle to meet future quotas.
Independent producers like Heirs Holdings and other local operators are reporting huge losses from crude theft, signaling that additional production would be cut if they failed to meet their loan obligations.
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Data obtained by BusinessDay from OPEC shows Nigeria’s oil production rose 5.6% to 1.4 million bpd in January 2022 from 1.3 million bpd in December 2021.
Although the cartel’s latest report shows an increase of 0.41% from the previous month, the country has seen a decline of 12.4% since the start of the year.
Experts attribute the country’s inability to meet production targets from coastal and shallow water IOCs to crude theft, sabotage of oil infrastructure and poor regulatory and fiscal conditions.
At Nigeria’s annual international conference and exhibition on Tuesday, Austin Avuru, executive chairman and founder of AA Holdings Limited, blamed the low production on oil majors’ decision to abandon their onshore fields.
He said investment in the industry had risen from a peak of $22 billion in 2012 to $6 billion in 2021.
“The result of this decline (600,000 barrels per day shortfall) in investment is what we see in our declining oil production,” he said.
Speaking at the Nigeria Oil and Gas conference in Abuja, Mike Sangster, managing director of TotalEnergies EP Nigeria, estimated crude theft could cost Nigeria up to $10 million a day.
He said gross theft had become an organized crime that needed to be brought under control.
“It is a huge loss for the country. So I think it really needs to be a priority to look beyond host communities and see how we can address raw security and eradicate it once and for all,” he said.
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Since last year, Nigeria has been unable to meet its production targets. Other OPEC members, including Libya and Angola, also face capacity constraints and may not be able to meet agreed production levels.
OPEC, on the other hand, pushed ahead with its plan despite pressure from the United States for the cartel to ramp up production to keep prices above $100 a barrel, fueling inflation around the world.
He said he would split the amount proportionally, and with only Saudi Arabia and the United Arab Emirates able to ramp up production, only part of it is likely to be delivered.
During the meeting, the oil cartel noted that chronic underinvestment in the oil sector has reduced excess capacity throughout the value chain.