Femi Asu with agency report
Nigeria and Libya will expect to face
growing pressure from their counterparts in the Organisation of
Petroleum Exporting Countries to end their exemption from production
cuts and accept an output quota, when ministers meet on Thursday (today)
for a closely watched summit.
The production cuts deal, which began on
January 1 and called on OPEC countries and 10 non-OPEC producers led by
Russia to cut a combined 1.8 million barrels per day in supplies, was
in May extended by nine months to March 2018.
Nigeria and Libya, which were exempt
from the cuts as they dealt with internal unrest that had targeted their
oil infrastructure, have ramped up oil production in recent months as
their security situations have improved.
While the production outlooks for both
countries remain hazy due to political, security and technical
challenges, voices had been growing louder within OPEC that their output
has recovered sufficiently to join in their market rebalancing efforts,
sources told S&P Global Platts.
“I think both countries will be
discussed,” an OPEC source told Platts, but he declined to say whether
members would insist on imposing quotas.
One option being discussed is a “loose”
quota that would be triggered if production in either country rises to a
certain level, while another option would be to place a quota right at
or above each country’s production target, to at least symbolise that
they were willing to accept a cap, other sources and analysts said.
But it would be entirely possible that
both countries’ exemptions would be maintained, as they had been
vehemently opposed to any output restrictions while recovering from
militancy, the sources said.
Nigeria declared in late September that
it had agreed to a production cap of 1.8 million bpd, a level the
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said would
not be achieved until early 2018.
Other OPEC ministers and delegates
appeared caught off guard by that announcement, as it contradicted
Kachikwu’s previous statements that Nigeria would not join the output
agreement until its production stabilised at 1.8 million bpd, from which
it would cut.
Kachikwu had told reporters then that he
wanted to “change the narrative” and that his country was already
contributing to the deal by producing below that level, albeit
involuntarily.
The nation’s oil production from January
to October this year was close to 1.74 million bpd, according to the
Platts OPEC survey, a rise of 300,000 bpd from December last year, but
still much below the 1.8 million bpd cap.
Output hit a 16-month high of 1.86 million bpd in August, but has fallen since due to operational and loading delays.
It could face further challenges, with
the growing threat of attacks in the oil-rich Niger Delta next year, as
the country heads into its presidential campaign season, analysts said.
Counting Nigerian oil production has
also been a difficult exercise, with divided opinions on what
constitutes crude and what should be counted as condensates.
Nigeria has long said its oil production
capacity is at around 2.2 million bpd, with condensate production
accounting for between 350,000 and 400,000 bpd. The remaining 1.8
million bpd or so, which coincidentally is its self-declared cap for the
agreement, consists of crude oil.
Nigeria this year began counting its
Agbami grade, output of which is about 250,000 b/d, as part of its
condensate production, which market watchers say makes it easier for the
country to keep its crude output below 1.8 million bpd.
But some independent secondary sources used by OPEC to monitor crude output under the deal still count Agbami as crude.
Platts, one of the secondary sources,
includes Agbami in Nigeria’s crude oil figure as it is marketed as a
crude export blend and not a condensate by the Nigerian National
Petroleum Corporation and international oil companies.
In its latest monthly oil market report,
OPEC said its six secondary sources pegged Nigerian crude production at
an average of 1.68 million bpd for the first 10 months of the year.
Nigeria’s directly reported figures to OPEC showed that crude output from January to October averaged 1.58 million bpd.