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FG hopeful as they write OPEC to seek for increased oil production quota

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FG hopeful as they write OPEC to seek for increased oil production quota

Nigeria has officially written to the Organization of Petroleum Exporting Countries (OPEC), requesting a higher production quota based on the OPEC+ agreement.

Despite previous attempts to effect the same output increase, the Federal Government is quite hopeful that the OPEC+ group will grant its latest request to raise the baseline from which its crude output quotas are calculated.

This disclosure was made by the Minister of State for Petroleum Resources, Timipre Sylva, during a chat with reporters at the Gastech conference in Dubai, on Tuesday, where he said that the technical problems that had affected the country’s output would soon be resolved.

The Federal Government had submitted its latest request at the July 21 meeting of OPEC+ where several other members of the coalition like Saudi Arabia, Russia, the UAE, Iraq, and Kuwait, were issued higher production baselines from which output quotas are determined to help end a 2-week policy impasse that was triggered by the UAE’s insistence on a baseline revision.

The UAE argued that its original baseline is “outdated” and said it would object to an extension of the output restraint deal beyond April next year unless it was changed. It complained that its substantial investments in its production capacity over the past several years should be taken into account.

Nigeria also argues that its baseline, which stands at 1.829mn b/d, is outdated as it was determined on production levels during a period in which circumstances were atypical.

What the Minister of State for Petroleum Resources is saying

Timipre Sylva said, “We have requested that OPEC reviews our production quota, and we expect that they will look into it because we have capacity for more production than we are producing now.

“What we are saying is that the data we have with OPEC on which they based our quotas was crisis time data. It was produced during the Niger Delta crisis. We believe that now the Niger Delta crisis is no longer there, we can produce a lot more than that.”

Sylva said Nigeria has shown in the past that it has the capacity to produce up to 2.6 million barrels per day and has therefore requested its baseline be raised to 2.2 million barrels per day.

He said, “We have the capacity, and we have proven it. With oil demand beginning to pick up as Covid-related restrictions ease, I believe OPEC+ will be willing to look at this again because we have a very good case… and I think they too have seen we have a good case.”

Sylva said he was not surprised that the 5 countries got their production outputs revised at the July meeting. He said, “We are a very responsible organisation and we look after each other. But by the same token, when it is our time, we expect that it will be reviewed for us as well.’’

What you should know

Nigerian has been struggling recently to even meet up with its current production quota at a time the FG is requesting a higher output quota. This, the Minister attributed to technical problems from re-tapping reservoirs that had been shuttered to comply with the stringent OPEC+ cuts of the past 17 months.

He said output could rebound to around 1.7 million BPD by November and two million barrels per day by the end of the year.

According to reports, last month, the country’s production fell to a 7-month low of 1.34 million barrels per day, which was around 260,000 b/d short of its August quota.

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