Page 5 - LatAmOil Week 48 2019

LatAmOil COMMENTARY LatAmOil
 Initially, this move had little effect. Indeed, Nigeria appears to have extracted no less than 1.886mn bpd of oil in August. This is 11.9% above the original quota of 1.685mn bpd and 6.3% above the revised gure of 1.774mn bpd.
More recently, though, Abuja has touted its willingness to work harder to remain in compli- ance. In October, for example, Nigeria’s Minister of State for Petroleum Resources Timipre Sylva acknowledged his country’s past violations but also stressed that e orts to curb output were underway.
Sylva spoke similarly on December 1, saying that Nigeria had been working to adhere more closely to OPEC’s output regime. Compliance has improved since August of this year, he said, and officials in Abuja have informed Saudi Energy Minister Abdulaziz Bin Salman, a mem- ber of the royal family, of this positive trend.
He further declared that Nigeria had been fully compliant with OPEC’s production quotas in November but did not give an exact gure on oil output in that month. According to o cial data, Nigerian oil yields hit 2.04mn bpd in the third quarter of 2019.
Sylva’s claim seems a bit far-fetched, given Nigeria’s lengthy history of exceeding its allot- ments. But the West African state may be suc- ceeding via an accounting trick – that is, by counting some of its new liquid hydrocarbon production as gas condensate rather than crude oil. At the OPEC meeting, it may seek to expand the scope of this reclassi cation practice.
Ecuador’s membership
Meanwhile, one of OPEC’s South American members may be preparing to discuss a more fundamental matter – namely, that of member- ship – at the upcoming meeting in Vienna.
Ecuador’s government revealed in October that it had decided to withdraw from OPEC at the end of 2019. It explained its decision by say- ing that the cartel’s policy was not compatible with its e orts to increase oil revenues.
is move reportedly surprised OPEC o - cials, but it is not entirely out of the blue. For one thing, it is not unprecedented: Ecuador dropped out of OPEC in 1992 before rejoining in 2007. For another, Ecuador has had a long-standing practice of producing more than its allotment
under OPEC’s quota system.
Nevertheless, Quito’s announcement has
been overshadowed by subsequent events. e capital and other Ecuadorean cities have recently been rocked by widespread protests over austerity programmes designed to support a $4.2bn loan deal with the International Mone- tary Fund (IMF) in general and over the govern- ment’s decision to li fuel subsidies in particular.
And now it appears that Ecuador may be backtracking. Sources familiar with the matter recently told S&P Global Platts that Ecuador was considering remaining in the cartel. It is not yet clear whether there is any substance to these reports. One source said that the parties were conducting talks on withdrawal “on a very high level”, while another said that Ecuador was not likely to waver in its push to leave.
What’s next for Brazil?
If Ecuador drops out of OPEC, the number of the group’s member states will drop from 14 to 13 – and it may not rise again for some time.
True, another South American state – Bra- zil – has been irting with the idea of joining OPEC. In late October, President Jair Bolsonaro said he had received an informal o er of mem- bership from Saudi Crown Prince Mohammed Bin Salman (MBS). He expressed keen interest in taking this step, saying: “Personally, I would really like to see Brazil become a member.”
But Bolsonaro also stressed that he was not ready to throw the full weight of his o ce behind the Saudi o er. Brazilian o cials should rst discuss the invitation with the president’s own economic advisors and with representa- tives of the Energy Ministry, he said. Until they accomplish this, they must not make any formal requests to join OPEC, he said.
No such request is likely to be forthcoming at the cartel’s next meeting. Even if the Brazilian president likes the idea of joining OPEC in the- ory, he has indicated he will not act on impulse. He has probably been reviewing responses to his announcement – and noticing that most indus- try analysts agree that seeking membership in the cartel would not suit Brazil’s interests. As a result, OPEC will probably not have much to say about Brazil and the possibility of keeping its number of members at 14 later this week.™
“ Abuja has touted
its willingness to work harder to remain in compliance with OPEC’s production quotas
MEXICO
Farm-ins more attractive than greenfield projects for potential investors in Mexico
More recently,
OIL and gas operators looking to invest in Mex- ico have fewer options than they did previously, owing to policy decisions made by President Andre Manuel Lopez Obrador. But some enter- prising companies are forging new paths, focus- ing on buying into ongoing projects rather than
pursuing green eld initiatives.
New elds are hard to nd, largely because
the current president has sought to undo or weaken many of the reforms and market-ori- ented measures introduced by his predecessor, Enrique Pena Nieto, between 2015 and 2018
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