Nigeria’s missed deadline spells potential oil production quota cut to 1.38 million barrels per day in 2024.
The Organization of Petroleum Exporting Countries (OPEC) will meet on November 26 and African countries face the possibility of being asked to stick to new crude oil production quotas in 2024.
This is because they failed to reach their assigned quota before November 2023.
S&P reports that tension is rising within OPEC+ due to disagreements among African members about potential cuts in oil production quotas.
In June 2023, many sub-Saharan African OPEC+ members, such as Nigeria, Angola, Equatorial Guinea, the Republic of Congo, Gabon, Sudan, and South Sudan, acknowledged the likelihood of reduced quotas for 2024. This reduction would take effect unless they could demonstrate increased production capacity before November.
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Since June 2023, the highest amount of crude oil production Nigeria has recorded aside from condensates production was 1,350,573 in October 2023.
In other months, production ranged between 1 million to 1.34 million barrels per day. This is a far cry from the allotted 1.78 million barrels per day quota assigned to the country for the year 2023.
These figures (which do not include condensate production) do not show that the country has been able to increase its crude oil production significantly.
So, Nigeria may be going into the new year, 2024 with a low crude oil production quota at 1.38 million barrels per day.
The new quota, if insisted on by OPEC, is an easy target to meet for the country due to the fact that the sector is making progress in the government’s fight against crude oil theft which has hampered production for months. However, the implication of a lower quota is that the country will not be able to record more growth in the oil sector.
The oil sector has also been the highest foreign exchange contributor to the country’s economy. A fall in production means less access to forex and fewer investments in the upstream oil sector.
According to S&P, Nigeria, as the largest oil producer in sub-Saharan Africa, faced a significant production gap in the first half of 2023.
Reports from the Platts OPEC Survey by S&P Global indicate that Nigeria’s average daily oil output stood at 1.38 million barrels, notably falling short of both its OPEC-assigned quota of 1.78 million barrels per day and its current capacity of 2.2 million barrels per day.
This production shortfall points to a broader trend across the continent, where various obstacles hinder the oil industry’s optimal functioning.
Underinvestment in older oil fields limits their efficiency and output, while divestments by major international players further strain production capabilities.
Insufficient exploration efforts and operational challenges add to the complexities faced by African oil-producing nations. In Nigeria’s case, rampant crude oil theft presents a significant hurdle, impacting production levels and contributing to the nation’s inability to reach its designated quotas.
These combined challenges have led to a consistent pattern where African countries struggle to meet their oil production targets, hindering their potential contribution to global oil markets.