Following OPEC’s decision on Wednesday, Nigeria can, in the next one year starting January 1, 2017, pursue programmes aimed at increasing its crude oil production capacity and growing national reserves and exports.
Although pipeline vandalism reduced daily production, sometimes to as low as 1.4 million barrels, Nigeria’s daily production averages about 2.1 million barrels. The country’s aspiration has been to raise that level to about 2.3 million barrels and build national reserves of about 30 billion barrels.
These are some of the benefits the country stands to gain as one of the three countries – out of the 14-member Organisation of Petroleum Exporting Countries, OPEC – granted special concessions from the group’s decision on Wednesday to cut crude oil production by about 1.2 million barrels per day, effective January 1, 2017.
OPEC President, Mohammed Al-Sada, explained that the output cut resolution, which would be binding for the first six months, was subject to a review for another six months, based on the recommendation of the special ministerial committee constituted to monitor compliance by members.
By virtue of the special concession granted during the 171st conference of the group in Vienna, Austria on Wednesday, Nigeria and Libya were completely exempted based on the peculiar circumstances in their countries, while Iran was given partial exemption of the cut.
The gesture, Mr. Al-Sada explained, would enable Nigeria recover from the negative impact of incessant attacks on its oil facilities by armed militant groups in the Niger Delta region, which resulted in a massive cut in its production and exports capacities.
He said Libya was equally granted the special concession following series of attacks on its oil facilities by terrorists groups operating in that region in recent months.
Iran was granted limited concession to allow settle down and recover, after serving years of U.S.-imposed sanctions, including restrictions on its oil production and exports.
The other country not affected by the cut, the first in about eight attempts since 2008, would be Indonesia, which recently opted to suspend its membership of the group till further notice.
Details of the impact of the cut, according to OPEC Secretariat figures, showed that Nigeria and Libya would maintain their pre-October production levels of 2.1 million barrels per day and about 670,000 barrels per day respectively prior to Wednesday’s meeting.
Iran is to cut about 90,000 barrels from its daily reference output of 3.975 million barrels; Algeria, 50,000 BPD from 1.089 barrels; Angola, 80,000 barrels from 1,753 barrels; Ecuador, 26,000 barrels from 548,000 barrels; Gabon, 9,000 barrels from 202,000 barrels and Iraq, 210,000 barrels from 4.561 million barrels.
Other adjustments include Kuwait, 131,000 barrels from 2.838 million barrels; Qatar, 30,000 barrels from 648,000 barrels; United Arab Emirate, 139,000 barrels from 3.013 million barrels and Venezuela, 95,000 barrels from 2.067 million barrels.
The biggest adjustment was to Saudi Arabia, whose 10.544 million barrels daily output would be cut by about 486,000 barrels.
With this arrangement, analysts say Nigeria, which has, for several months, been devastated by a combination of an economy in recession as a result of decline in global oil prices and low oil export earnings following disruptions to oil export facilities, would takes advantage of the concession to recover.
Hours after OPEC announced its resolution on Wednesday, the price of Brent crude, Nigeria’s crude oil blend, jumped by about 8.26 percent, from $46.38 per barrel to about $50.21.
Close followers of the Nigerian situation say the rise in crude oil prices on the heels of OPEC decision was welcome news, particularly to the government in dire need of more revenue to pursue its ambitious infrastructure development programme to provide a solid foundation for economic growth.
Under the ‘seven-big wins’ initiative launched recently, the federal government outlined plans to swiftly increase the country’s daily crude oil production capacity to about 2.3 million barrels and grow national reserves to about 30 billion barrels.
The Minister of State for Petroleum Resources, Ibe Kachikwu, recently announced the signing of an agreement on behalf of the federal government for a $15 billion oil and gas investment package with India to bolster Nigeria’s oil crude production.