Wednesday, October 23,
2019 / 11:40 AM / By CSL
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Credit: World Finance
According to a report by Reuters, Nigeria's oil production quota has been increased by OPEC to 1.77mbpd from 1.69mbpd which the country was given in December last year. While OPEC is yet to make a formal announcement about the change in Nigeria's agreement, the Nigerian Minister of State for Petroleum Resources- Timipre Sylva- was quoted to have made the new target known in an interview with Bloomberg. The upward adjustment in the nation's production quota translates to an 80kbpd increase in the country's permissible output, under the oil cartel's 2019 accord.
The upward revision came on the back of efforts by the country's delegates to ensure the agreed quota makes room for expansion in the country's oil industry. Output from Total-operated Egina oilfield was not factored in when OPEC calculated the initial quota. Although, the former minister had suggested that he may seek to have Egina output classified by the cartel as condensate- which is not subject to the quotas- Egina has a relative density (API gravity of 27.5) that is significantly heavier than typical condensates. Thus, it is difficult to make a case for excluding Egina from the OPEC+ accord, being a medium sweet crude grade.
Nigeria, which was exempted from the previous deal but agreed to a quota under the current accord, has in recent months pumped more oil than its cap. Data from OPEC monthly oil market report reveals that Nigeria produced 1.96mb of oil per day in June 2019, 16% more than its 1.69mbpd output ceiling. Nigeria's overproduction is, however, being masked by reduced production in Angola, Equatorial Guinea, Kuwait and Saudi Arabia- who have complied every month so far in 2019.
We note that the upward revision of the output cap will see Nigeria improving in its compliance with the supply cut accord.