OPEC’s Voluntary Adjustment Pegs Nigeria’s Daily Oil Output to 1.6mbd

Voluntary commitment to the crude oil production adjustment agreed by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and their associates led by the Russian Federation in December 2018 has lowered Nigeria's daily crude oil production level to 1.685 million barrels per day (mbd), THISDAY has learnt.

A document containing the production adjustment commitments made by OPEC member countries Nigeria shows that Nigeria is voluntarily stopping 53,000 barrels per day (bd) of her crude oil without condensate from getting to the international market as part of the agreement reached at the 175th meeting of the OPEC Conference and fifth OPEC and non-OPEC ministerial meeting, which was held in Vienna, Austria, last December.

In the document posted on the OPEC webpage, Nigeria declared its reference oil production level to be 1.738mbd out of which 53,000bd would be deducted, and 1.685mbd allowed into the market.

The country, it was also learnt, would be the largest African producer in terms of volumes to contribute to the production cut agreement considering that Angola which declared a reference production volume of 1.528mbd will contribute 47,000bd to the agreement while Algeria with 1.057mbd production level will contribute 32,000bd.

Other African producers like Congo, Equatorial Guinea, Gabon, South Sudan and Sudan will contribute 10,000bd, 4,000bd, 6,000bd, 3,000bd, and 2,000bd respectively.

Libya is exempted from the agreement on account of geo-political issues.

Collectively, the document stated that OPEC member countries will take out 812,000bd of oil while 10 non-OPEC countries will take out 383,000bd to bring the expected volume of oil to be taken out of the market effective from January 2019 to 1.195mbd.

In December, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, told THISDAY that Nigeria could not be said to be comfortable with its current oil production levels, but did not ask to be exempted from the cut.

The minister initially disclosed that the country could contribute up to 40,000bd to the cut, representing about 2.5 per cent of her 1.7mbd production level at that time.

“We didn’t ask for exemption; we wanted to make sure everybody shared in the pain. If some happenstance occur, you are expected to come back to ask for exemption.

“There was a lot of difficulties in getting everybody together. You know the traditional difficulties in relationships between Saudi Arabia and Iran. While everybody was willing to cut, some countries were not willing to cut.

“It was more of the mechanics of how do you present it to the market as opposed to the substance of the resolution itself and that was what we broke yesterday and decided to take a break and come back with cool heads today,” he said then.

He also explained that the output cut was as a matter of fact in the best interest of Nigeria, adding that with larger oil volumes in the market weakening prices, Nigeria would have found it difficult to implement its budget for 2019.

Asked then if the cut had any impact on Nigeria’s budget with regards to production volume, he said: “It has but has the potential of saving your budget matter of fact, because if we don’t, prices were already sliding..."

“If you look at the value of 40,000 barrels versus the gap of earning $70 per barrel - I would imagine that prices would hover around $65 or more, and if we didn’t do that, the budget will be dead. This was a savings mechanism to hold the money than holding the barrels. Technically, Nigeria is not affected, it is a win for Nigeria.”

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