OPEC, the Organization of Petroleum Exporting Countries, Tuesday, increased Nigeria’s oil production quota to 1.701 million barrels per day, at a time when the commodity is trading at a conservative price of $70 per barrel.
Currently, Nigeria has been pumping just over 1.2 million per day in the last few months. This is expected to lead to a potential loss of foreign exchange revenue of as much as $1.085 billion in February, calculated at the production loss of about 500,000 barrels per day by February.
The revenue loss is forecast to severely negatively impact the performance of Nigeria’s three tiers of government that depend largely on oil revenues for survival.
For instance, the Nigerian National Petroleum Company (NNPC) Limited was only able to remit N10.5 billion, which was 8.5 per cent of its projected N122.7 billion to the federation account last month.
But the national oil company had blamed the inability to restart oil wells shut down in 2020, when OPEC compelled member countries to cut production for the declining production.
Other challenges, which the NNPC listed include, issues with host communities, vandalism, and incessant force majeure on major assets as well as technical issues leading to shutdowns.
Nigeria’s ageing upstream infrastructure, following years of under-investment in expanding and modernizing the assets, also bear heavily against its capacity to improve production.
After the 24th OPEC and non-OPEC ministerial meeting where the decision to allocate an additional 400,000 barrels per day to its members was arrived at on Monday, OPEC stated that it was sticking to the gradual plan to unwind in view of the current oil market fundamentals and the consensus on its outlook.
“(We) reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC ministerial meeting and the decision to adjust upward the monthly overall production by 0.4 mb/d for the month of February 2022,” it announced.
“We reiterate the critical importance of adhering to full conformity and to the compensation mechanism taking advantage of the extension of the compensation period until the end of June 2022.
“Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC ministerial meeting,” it added.
Speaking before the OPEC meeting, Secretary General Sanusi Barkindo stated that in 2022, the outlook correlates with a generally positive trajectory with regard to market fundamentals.
Barindo added that while there were some uncertainties, particularly related to mutations of the coronavirus, there are signs that the global economic recovery, supported by the contribution of the ‘Declaration of Cooperation’ participating countries to oil market stability, can continue in the year ahead.
