OPEC faults PIA, says new oil law unlikely to rescue Nigeria

By Akpobor Jirue, Abuja

Nigeria, alongside three other oil- producing nations namely Angola, Iraq and Malaysia, have been identified as some of those who might not be able to meet up with their rising production quotas as pressure from the United States mounts on the OPEC and its allies OPEC+ to increase supply.

This is even as the Organization of Petroleum Exporting Countries (OPEC), and its allies including Russia, collectively known as OPEC+, meets tomorrow September 1, 2021 to discuss the previously agreed increase of 400,000 barrels per day (bpd) for the next several months.

U.S. President Joe Biden’s administration has urged OPEC and its allies to boost oil output to tackle rising gasoline prices that it views as a threat to the global economic recovery.

Analysing the implications of the call for production on member, Energy Intelligence, said the four countries may not be able to cope with the new demand due to absence of fresh investments in the oil and gas industry over the years.

The report stated that, “While OPEC-plus has committed to adding 2 million barrels per day by the end of the year to alleviate oil market tightness, some of this won’t materialize due to weaker members’ inability to produce at higher levels.

“Years of underinvestments is coming back to haunt Nigeria, Angola, Iraq and Malaysia, which won’t be able to meet their rising production quotas under the latest OPEC-plus deal”, says Energy Intelligence,
“The 19 member nations with quotas are forecast to produce an average 36.8 million b/d from August through December, which is 700,000 b/d below the group’s average quota of 37.5 million b/d for the period.

“Starting in August, Opec-plus agreed to add 400,000 b/d per month into 2022, with a policy review to come at year’s end. Opec’s Mideast heavyweights, led by Saudi Arabia, and non-OPEC allies Russia and Kazakhstan, can fill their larger allotments, but others can not.

The report stated that the situation potentially opens the door for stronger producers to overproduce to make up for weaker members’ shortcomings or could lead to a tighter market.

Energy Intelligence forecasts that third-quarter production for the 19 members will average 36.7 million b/d, or 630,000 b/d below target. The shortfall will increase to 780,000 b/d in the fourth quarter. By year’s end, the alliance’s output will be about 1.8 million b/d higher than in July.

“Nigeria and Angola are in the worst shape, while Iraq and Malaysia are beginning to creak under the strain. In July, these four collectively produced 825,000 b/d beneath their quotas,” Energy Intelligence says, while adding
that “Over August-December, as their targets grow, the shortfall will average 850,000 b/d.

It noted that, “While each producer has unique reasons for its upstream woes, underinvestment is the common denominator. In Nigeria, the Bonny terminal suffered a defective buoy mooring earlier this year, while aging pipelines are constraining Qua Iboe supplies.

“Observers say port operators have been reluctant to invest given energy transition risks and the planned launch of the massive 650,000 b/d Dangote refinery, which will keep a chunk of exports at home.

“In Angola, production is near a 17-year low at 1.08 million b/d due to weak investment and technical glitches at mature fields. Some support will come from start-up of TotalEnergies’ Zinia Phase 2, which is under way. In Iraq, ramshackle infrastructure has crippled output, while the country’s aggregate field production capacity has fallen due to underinvestment, operational issues and forced cutbacks to meet its OPEC-plus
commitments.

“Reaching its quota of 4.2 million b/d by year-end is achievable, barring any mishaps, and drilling projects are underway at Majnoon and elsewhere. But sustaining pre-pandemic output levels of 4.6 million b/d will be a challenge without major new investments.”

Malaysia’s fields are maturing without replacements. These members’ production woes, the report stated, if combined with strict compliance by other OPEC-plus members, could alleviate oversupply fears in the coming months as the Covid-19 Delta variant delays the recovery in global oil demand.