Nigeria’s membership of the oil cartel according to analysts is daily threatened by Saudi Arabia and Russia’s frequent adjustments of voluntary production cut and pressure being mounted on other members of the Organization of the Petroleum Exporting Countries (OPEC) to voluntarily cut output levels.
Experts have hinted that the country which is the largest oil producer in Africa and heavily reliant on oil and gas revenue, may by this development be forced to suspend its membership in the Organization of the Petroleum Exporting Countries (OPEC) due to growing internal demand for energy, the commitment of President Bola Tinubu’s administration to shore-up crude oil production and his recent directive to the Service Chiefs, heads of security, and intelligence agencies to “crush” oil thieves.
They have also therefore censured Saudi Arabia and the OPEC leadership for the consistent inconsistency in the extension of voluntary production cuts, the latest of which is now extended to 2024, despite the failure of its efforts to direct prices by supply control.
EnergyDay’s check showed that Saudi Arabia and OPEC have cut oil production several times as a precautionary measure to stabilize the oil market.
It was gathered that several producers of the OPEC and its partners, collectively known as OPEC+, in April 2023, agreed to a combined 1.66 million barrels per day of production declines until the end of the year.
In May 2023, Saudi Arabia and other major oil producers announced surprise cuts totaling 1.15 million barrels per day from that month until the end of the year, a move that could raise prices worldwide.
Prince Abdulaziz bin Salman, Saudi Energy Minister, defended that voluntary output cuts as a precautionary measure to stabilize the oil market.
As if that is not enough, in June 2023, Saudi Arabia announced an extra voluntary oil supply cut of 1 million barrels per day for at least July on top of its existing production cuts.
On Monday, July 3, 2023, Saudi Arabia said it would extend its voluntary oil output cut of one million barrels per day for another month to include August.
The cut is in addition to the voluntary cut previously announced by Saudi Arabia in April alongside other OPEC+ producers, which extends until December 2024.
EnergyDay therefore can confirm that the total amount of production cut that Saudi Arabia has voluntarily carried out between April 2023 and July 6, 2023, is 2.5 million barrels per day.
This figure includes its voluntary oil output cut of one million barrels per day for August, thereby bringing its production to approximately 9 million barrels per day.
While Russia, another global player, also announced a 500,000 barrel-per-day decline in exports in August 2023.
These cuts are in addition to the voluntary cut previously announced by Saudi Arabia in April alongside other OPEC+ producers, which extends until December 2024.
These African countries, according to experts, can follow the pattern adopted by Indonesia, which left OPEC in the mid-2000s when it became a net oil importer but later rejoined the cartel.
Ahmad Ghaddar, Energy Correspondent, Reuters, in a recent analysis suggested that Saudi Arabia, UAE and other oil producers in Gulf, are boosting their spare production capacity(which they can afford to do) at the expense of Nigerian and some OPEC members that may be struggling to even maintain production.
According to him, this could widen the gap between Gulf members—perhaps excluding Iraq—and African members such as Nigeria and Angola.
He therefore shared the view that the African OPEC members may have to reassess their strategies due to oil quota losses.
EnergyDay gathered that every adjustment by OPEC in oil quota reform increases the Gulf’s dominance, therefore, giving larger production quotas to OPEC Gulf members such as Saudi Arabia, the UAE, and Kuwait.
The voluntary output cut and the quota reform have significant impacts on Nigeria and other African countries that are trying to increase their crude oil and condensate production in mature fields.
Nigeria, in particular, has seen its oil output drop to a 32-year low due to rampant theft from its pipelines, causing it to lose its status as Africa’s largest crude producer to Angola.
Although the country has in the last few months recovered its position as the biggest crude oil producer in Africa, there is an effort by the present administration to do more in order to reposition the economy.
Nigeria has regained its position as Africa’s largest crude oil producer in May 2023, according to data from the Organization of Petroleum Exporting Countries (OPEC).
The country’s oil output rose by 15.6% to 1.3 million barrels per day (mb/d) in June 2023, from 1.184 million bpd in May.
There are signs that the output level will continue to rise on the sideline of President Tinubu’s ambitious economic reforms the country’s biggest in decades.
Tinubu aims to double Nigeria’s crude oil production and raise $17.4 billion through the sell-down of NNPC’s assets. He plans to reach 4 million barrels per day of oil and 12 billion cubic feet per day of gas production capacity by 2030.
Ofcourse, the decline in production hurts the country’s finances amid an economic downturn, this is why President Tinubu has continued to make efforts to shore up sufficient investment opportunities to increase production capacity and revamp the country’s hailing economy.
As the biggest African oil and gas producer, the government is concerned about improving its oil revenues with the massive incentives being offered to investors to boost investment in the sector. This will no doubt negate the adjustment and quota reforms of Saudi Arabia and OPEC+.