Nigeria, the largest crude oil producer in Africa, is poised to navigate challenges in its oil production following the recent decision by the Organization of Petroleum Exporting Countries (OPEC) and its allies to extend output cuts for the next three months.
The decision, aimed at stabilising global oil markets amid ongoing volatility, presents a significant hurdle for Nigeria’s oil sector. With the country heavily reliant on oil revenue, the extended output cut poses implications for its economy and fiscal planning.
Jide Pratt, chief operating officer of AIONA, said that Nigeria’s focus should be on meeting its production targets, which has eluded the country for a long time.
“For Nigeria, we need to focus on meeting our quota of 1.57 million barrels per day (bpd) and then 1.8 million bpd to ease our economic situation. This should be the focus of our government,” Pratt said. “ Our gas projects also need to be delivered to help our economy yet again. At the time we hit 1.8mbpd, we can then have conversations with OPEC.”
According to him, one thing the production cut shows is a clear unity amongst OPEC members to try to keep prices at $80 and above for a while. “The market will tighten with this being held for the rest of 2024.”
Nigeria’s adherence to OPEC’s production quotas has been a subject of scrutiny in the past, with challenges such as pipeline vandalism and fluctuating oil prices affecting its ability to meet targets. The extended output cut underscores the need for strategic planning and diversification efforts to mitigate the impact on Nigeria’s economy.
According to the OPEC monthly oil market report, Nigeria’s oil production stood at 1.42 million bpd before the announcement of the output cut. With the extension of the output cut, Nigeria is expected to adjust its production levels in line with OPEC’s directives, further impacting its oil revenue projections for the coming months.
As Nigeria navigates the challenges posed by the extended output cut, stakeholders emphasise the need for proactive measures to mitigate its impact on the economy. This includes leveraging opportunities in non-oil sectors, enhancing efficiency in oil production and distribution, and strengthening collaboration with OPEC and its allies to ensure sustainable market stability.
Spearheaded by Saudi Arabia and Russia, OPEC+ decided to prolong the recent voluntary oil production reductions for an additional three months to push up prices, which have continued to be low amidst persistent geopolitical conflicts across Europe and the Middle East.
Saudi Arabia extended its voluntary production cuts by 1 million barrels per day for the next three months, as reported by the state news agency. These cuts, initially implemented in July 2023, are in addition to the 500,000-barrel daily reduction agreed upon in April of the same year.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has disclosed that Nigeria’s oil production target has been revised upward to 2.5 million barrels per day. This revelation came to light in a document obtained from the NUPRC in Abuja last Friday.
Gbenga Komolafe, the Chief Executive of the NUPRC, emphasised Nigeria’s strategic position in Africa’s oil and gas industry, highlighting the country’s substantial reserves.
He said, “The commission has been working assiduously to ensure that the Petroleum Industry Act is effectively implemented for growth in oil and gas reserves as well as achieving the national average daily production target set at 2.5 million barrels of oil and condensate per day in the near term.”
Komolafe further emphasised the vast potential of Nigeria’s oil and gas reserves for sustainable development and prosperity, noting that Nigeria accounts for 30 percent and 34 percent of Africa’s oil and gas reserves, respectively.
He provided insight into the current production figures, stating, “Although the actual national production currently averages 1.33 million barrels of oil per day and 256,000 barrels of condensate per day, the national technical production potential currently stands at 2.26 million bpd while the current OPEC quota is 1.5 million bpd.”
