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Nigeria Agrees to Cut Oil Production To Stabilise Crude Supply Market

The Nigerian delegation said it was confident that the ongoing security intervention under the leadership of President Tinubu will enable the restoration of the country’s production.

Nigeria has agreed to cut its Organisation of Petroleum Organisation (OPEC) crude production, to ensure global oil market stability, a statement by the country’s delegation to the meeting in Vienna,  said on Sunday.

Alongside other African countries which have struggled in the last few years to meet their production quota, the delegation stressed that the country’s output will now be hinged on its highest volume in the last six months which is 1.38 million barrels per day.

“Nigeria alongside other OPEC and Non-OPEC members at the Joint Ministerial Monitoring Committee (JMMC) meeting agreed to  cut production volumes in order to ensure global oil market stability.

“Furthermore, Nigeria, Congo and Angola have agreed that the highest production volumes of the last six months (November 2022 – April 2023)  be used as the basis for the determination of their 2024 production quota,” the statement added.

The country has recently blamed massive oil theft as well as years of underinvestment for the development, but has since August last year moved to end the menace by ramping up security in the Niger Delta.

“ Nigeria’s highest production of crude oil only of 1383KBD was achieved in February 2023. OPEC has also agreed to allow these countries to continue to produce maximally to their OPEC quota of 2023.

“This implies that Nigeria can ramp up its production up to its current quota of 1742KBD and subsequently be capped at 10 per cent less as its quota for 2024 subject to verification by independent secondary sources,” it stated.

Besides , the Nigerian delegation said it was confident that the ongoing security intervention under the leadership of President Bola Tinubu will enable the restoration of the country’s production to the tune of 1580KBD crude oil.

“This will be complemented by condensate of about 400KBD. This will ultimately enable Nigeria’s crude oil and condensate production of about 2 million barrels per day in 2024,” the delegation said.

Meanwhile, Nigeria’s state oil firm, the Nigerian National Petroleum Company Limited (NNPC), is winding down crude swap contracts with traders and will pay cash for petrol imports, its Chief Executive, Mallam Mele Kyari, told Reuters.

Adding that private companies could begin importing petrol as soon as this month, the firm stated that the move was part of new Nigeria’s President Bola Tinubu’s plans to deregulate the gasoline market and reduce the burden on government finances.

Tinubu has already scrapped a costly fuel subsidy, effective from last Tuesday, a decision which tripled petrol prices, angering labour unions who have called for a strike starting on Wednesday if the decision is not reversed.

NNPC has been importing gasoline from consortiums of foreign and local trading firms and repaying them with crude oil via what are known as Direct Sale Direct Purchase (DSDP) contracts since 2016 because it does not have enough cash to pay for the purchases, data and trading sources said.

“In the last four months we practically terminated all DSDP contracts. And we now have an arm’s-length process where we can pay cash for the imports,” Kyari told Reuters in an interview late on Saturday.

This is the first time NNPC has said it is terminating crude swap contracts. By importing less petrol as private companies import the bulk, NNPC will be able to pay for its purchases in cash, Kyari said.

Nigeria is Africa’s biggest crude producer but imports most of its refined products after running down its refineries.

A significant drop in oil production last year coupled with high global fuel prices due to the war in Ukraine pushed NNPC’s debt to traders higher. It owed the consortiums about $2 billion, a September 2022 NNPC report to the Federation Account Allocation Committee (FAAC) showed.

An industry source with direct knowledge of the matter told Reuters that NNPC was still allocating crude for fuel swaps for July loading, though less than in previous months. In its report detailing March crude oil loadings, NNPC also allocated crude to the swap contracts held by the consortiums.

Kyari said NNPC’s monopoly on gasoline supplies was ending and private firms could start importing as early as this month.

Kyari added that Nigeria’s total crude and condensate output was at 1.56 million barrels a day as of Friday. Nigeria has struggled to meet its OPEC oil quota of 1.742 million bpd due to grand oil theft and illegal refining.

That has raised doubts on whether Nigeria can meet supplies for the 650,000 bpd newly commissioned Dangote Refinery. NNPC has a contract to supply 300,000 bpd to the refinery.

In the same vein, Nigeria’s daily crude oil production has surged to about 1.6 million barrels per day, and it’s expected to hit 1.8 million barrels per day, according to the Chief Upstream Investment Officer of the NNPC Upstream Investment Management Services, Bala Wunti.

Wunti made the disclosure on Saturday at the 186th meeting of the Organisation of Petroleum Exporting Countries (OPEC).

The NUIMS boss was also confident that with the technology deployed, Nigeria’s oil production will hit 1.8 million barrels by July or early August.

 “It is what we are harvesting already, and the result of the security collaboration is what actually reversed the trend of our declining production.

“That we are back to about 1.6 million barrels today is a result of the collaboration. Everybody is working, the security agencies are working in synergy with the industry, the regulators are working and the communities,” he said.

He added: “What we have done is to bring everybody together: the four players, the security agencies, the regulators, industry players, as well as the communities through the private community contractors.

“And then we brought in overlaying technology. That technology created platforms, one of which is the collaborating platform, whereby all security issues are now seen in real time.

“And it is the outcome of that that has brought about the confidence that we have to hit about 1.8 million barrels by the end of July or early August,“ he stated.

He dismissed the doubt that  reaching the new target was impossible, saying that, “as of today, our instantaneous production number is about 1.59 million which is basically 1.6 million and this is because of some of our facilities that are basically going through a turn around maintenance.”

He said some of the facilities have 40,000 barrels capacity, which will be on stream by Sunday (yesterday).

Emmanuel Addeh