· Insists no more crisis
By Teddy Nwanunobi
Despite struggling to meet its production quota recently, the Federal Government, on Tuesday, at the ongoing three-day Gastech 2021 conference, which began at the World Trade Centre (WTC) in Dubai, United Arab Emirates (UAE), requested for a higher production quota under the OPEC+ accord.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, who spoke on the sidelines of the annual event, maintained that technical problems that hampered Nigeria’s output will soon be resolved.
OPEC and its allies are next scheduled to meet October 4
Nigeria’s quota, which covers only crude oil and not condensate, is 1.614 million barrels per day (bpd) for September, and is scheduled to rise by roughly 17,000 bpd each month, in line with the OPEC+ alliance’s, plans to gradually ease back on production cuts implemented in the pandemic.
Sylva said that Nigeria’s full production capacity is closer to 2.2 million bpd, which should be reflected in a revised quota, even though it has struggled to produce at its current allocation.
Nigeria self-reported crude output of 1.27 million bpd in August, down from 1.44 million bpd in July.
“We’ve just put a request on the table, and we expect that to be looked at. We have capacity for more production than we are producing right now. Unfortunately, we are constrained by the quota,” Sylva maintained.
OPEC and its allies are next scheduled to meet October 4.
The current OPEC+ agreement calls for the group to collectively raise output by 400,000 bpd each month through the end of 2022, with a review of the pact scheduled in December 2021.
At the group’s July meeting, Saudi Arabia, Russia, the UAE, Iraq and Kuwait were issued higher production baselines from which quotas are determined, that go into effect in May 2022.
The move, agreed after more than two weeks of acrimonious negotiations, was spurred by a complaint from the UAE that its substantial investments in its production capacity over the past several years should be taken into account.
Production baselines had been largely based on October 2018 production levels.
Sylva attributed Nigeria’s production struggles to technical problems from retapping reservoirs that had been shuttered to comply with the stringent OPEC+ cuts of the past 17 months, and said that output could rebound to around 1.7 million bpd by November, and 2 million bpd by the end of the year.
“We had some issues from shutting down the reservoirs. When you shut down a reservoir, to restart it, sometimes there are challenges,” he stated.
Key Nigerian grade Forcados had been disrupted for almost a month until Shell lifted force majeure on loadings September 10.
Industry sources said the suspension of exports was due to an oil spill near the Forcados terminal.
Other Nigerian crudes, such as Bonny Light, Escravos, and Qua Iboe have also faced production issues in recent months due to operational and technical reasons.
Growing threats by militants to renew attacks on oil infrastructure in the restive Niger Delta remain a concern.
It was sabotage and oil theft by those militants in 2018 that had caused great volatility in Nigeria’s crude production that year, which Sylva said penalised the country when OPEC+ production baselines were set.
Nigeria reported pumping 1.77 million bpd in October 2018, jumping up to 1.94 million bpd in November 2018.
“The basis for giving us this quota was (that Nigeria was in) a crisis. Right now, we don’t have any crisis anymore, and we believe we can produce more,” he added.