Page 4 - AfrElec Week 48

AfrElec COMMENTARY AfrElec
An uneasy year for OPEC and its member states
NewsBase examines issues confronting two of the cartel’s member states in Africa and South America. Nigeria’s power indusry cannot rely on the oil sector for steady gas
NIGERIA
WHAT:
OPEC is likely to discuss Nigeria’s non-compliance with quotas and Ecuador’s move to exit the group at its upcoming meeting.
WHY:
Nigeria may ask for more leeway on condensate, and Ecuador may slow its march toward the exit.
WHAT NEXT:
Brazil is not likely to make a formal bid for membership in the short term
OPEC has not had an easy year. e organisa- tion’s e orts to stabilise the oil market – that is, its attempts to generate a little upward momen- tum in crude prices, which have been stub- bornly sluggish, by reining in production under a multi-lateral agreement that is due to expire on March 31, 2020 – have had limited success.
Many industry analysts are now describing the market as oversupplied. ey have asserted that conditions are unlikely to change for the bet- ter unless the cartel and its allies, known as the OPEC-plus group, endorse further output cuts at their next meeting in Vienna on December 5-6.
ere is a certain amount of support for such cuts among the parties to the OPEC-plus agree- ment, since all of these states are keen to see their oil revenues rise. It remains to be seen, though, whether this view prevails, especially in light of weak demand. e Norwegian consultancy Rys- tad Energy, among others, has pointed out that the OPEC-plus group is not yet committed to extending the term of the output agreement, let alone revising it to mandate further reductions.
But the fate of the production quota regime isn’t the only topic slated for discussion later this week. e group is also sure to discuss a num- ber of issues on a country-by-country basis. is article will examine a few of those issues, focus- ing on two OPEC member states in Africa and South America.
Nigeria’s compliance
In sub-Saharan Africa, production levels are still a leading concern – particularly in Nigeria.
e West African state has a long track record of non-compliance with production quotas. For much of this year it has remained on the same path, regularly exceeding its allotments even a er being granted more leeway. OPEC xed its quota at 1.685mn barrels per day in July and then quickly raised it to 1.774mn bpd. It did so with little fanfare, in response to pleas from Nigerian o cials who argued that the July gure had been drawn up earlier in 2019, prior to the launch of development work at the o shore Egina eld. Egina, which lies in Nigeria’s deepwater zone, is currently yielding 200,000 bpd
Initially, this move had little e ect. 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 efforts 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
More recently, Abuja has touted its willingness to work harder to remain in compliance with OPEC’s production quotas
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w w w . N E W S B A S E . c o m Week 48
05•December•2019