Johannesburg: Nigeria implemented its portion of the Opec+ production deal in February, said the country’s oil minister, a move that enhances the impact of supply cuts that have already boosted crude prices.
“We’re basically complying, effective February” with the country’s pledged 53,000 barrel-a-day reduction, Minister of State for Petroleum Emmanuel Ibe Kachikwu said in an interview on Thursday. “The price fluctuations mean Opec needs to be a bit more together, a bit more determined to try to defend the market.”
The Organisation of Petroleum Exporting Countries and allies agreed to reduce output by 1.2 million barrels a day in the first half of 2019 in order to prevent a supply glut. While the deal has contributed to a jump in crude prices of more than 20 per cent so far this year, implementation has been uneven, with Saudi Arabia cutting deeper and faster than promised and other nations including Russia going slow.
Nigeria actually boosted crude production by 52,000 barrels a day to 1.792 million in January, according to third-party estimates compiled by OPEC’s secretariat. In February, the country was compliant with its agreed 1.685 million barrel-a-day limit, Kachikwu said.
The producers’ group will meet again in April to discuss whether to continue the supply reductions in the second half. Nigeria would have a hard time making deeper cuts, the minister said.
“If more cuts need to come, there would be major challenges because between December and now we’ve had the Egina field come online,” Kachikwu said.
The offshore field, operated by French energy giant Total SA, hasn’t yet reached its maximum production level of about 200,000 barrels a day, but may do so in March, he said. Some of that output is a light oil called condensate, which isn’t counted in the Opec+ deal, and some is crude, he said.
“The more we go outside the parameters of what we’ve agreed upon, the more we would struggle. We need all the money we can get for the country,” Kachikwu said.
With the election of President Muhammadu Buhari last weekend, Kachikwu endeavours to complete investment in the oil sector and community engagement targets which have taken longer than expected.
“For Nigeria, a lot of infrastructural repairs are key — a lot of our infrastructures are decaying,’’ including state-owned refineries operating at a fraction of their capacity, he said. “We haven’t made as much progress as we expected.’’
Private investment from Nigerian billionaire Aliko Dangote, who said he’s on schedule to finish a $15 billion oil refinery next year, and about 10 modular refineries underway, will help the country to become self-sufficient in fuel production as early as 2020, according to Kachikwu. The minister missed a target of completing the project this year.
The country should also produce oil at a lower cost and increase transparency with the ability to better track income and sales of the resources, he said. Militancy continues to be an issue and community engagement needs to be more robust.
Niger Delta Avengers, a militant group that severely damaged the country’s oil output in 2016, threatened in a January posting on its website to carry out attacks on crude installations.
People living in the oil-producing states “are still not as happy” as they should be, Kachikwu said.