- 2024 Budget May Run Into Troubled Waters After OPEC’s Cut
- Brazil Invited To Join Oil Cartel From 2024
There is palpable anxiety in Nigeria that the projections of the 2024 budget may be threatened after OPEC+, yesterday handed Nigeria a 2024 oil output target lower than Africa’s largest oil producer had hoped.
This development follows a meeting in June where OPEC+ agreed on a complex deal that revised production targets for several members.
OPEC had tasked three consultancies – IHS, Rystad Energy and Wood Mackenzie – to verify production figures for Nigeria, Angola and Congo.
But at its 36th OPEC and non-OPEC Ministerial Meeting, ONOMM held via videoconference, Thursday, ONOMM, stated:
“In accordance with the decision of the 35th OPEC and non-OPEC Ministerial Meeting, the completion of the assessment by the three independent sources (IHS, Wood Mackenzie and Rystad Energy) for production level that can be achieved in 2024 by Angola, Congo and Nigeria as follows: Angola at 1,110 t/bd, Congo at 277 t/bd and Nigeria at 1,500 t/bd.”
Previously, the cartel had stated: “By end of June 2024, all OPEC and non-OPEC Participating Countries in the Declaration of Cooperation will go through an assessment by three independent sources (IHS, Wood Mackenzie, and Rystad Energy) specialized in oil upstream sources in order to identify countries’ production capacities to be used for 2025 reference production levels.
“The OPEC Secretariat will coordinate the assessment while maintaining the independency of the three sources (IHS, Wood Mackenzie and Rystad Energy).
“Angola’s stated production plan for 2024 is subject to verification by the three abovementioned sources by the next ordinary ONOMM to be held by the end of 2023, and if verified then the number will be maintained.
“The required production level for Congo and Nigeria may be updated to equal the average production that can be achieved in 2024, as assessed by the three independent sources (IHS, Wood Mackenzie, and Rystad Energy) specialized in oil upstream by the next ONOMM to be held by the end of 2023.
However, this is bound to send shockwaves into the projections of the FG which has made ramping up production a necessity.
At the 2024 Budget Presentation a few days ago, President Bola Ahmed Tinubu had projected that the country will produce 1.78 million barrels per day.
“After a careful review of developments in the world oil market and domestic conditions, we have adopted a conservative oil price benchmark of $77.96 per barrel and daily oil production estimate of 1.78 million barrels per day” the President had said.
The cut by OPEC+ is bound to trigger concerns.
Meanwhile, a major crude producer, Brazil will join OPEC+ from next year, the oil cartel announced on Thursday.
Brazil is among the world’s top 10 producers and has been the largest oil producer in Latin America since 2016.
Its crude production hit a record 3.7 million barrels per day in September, a near 17 percent increase from the same month last year and a 6.1 percent hike from August, according to pricing agency Argus Media.
Ministers of the 13-member Organization of the Petroleum Exporting Countries (OPEC) headed by Saudi Arabia and its 10 partners led by Russia had earlier met to discuss further output cuts to boost prices.
“The meeting welcomed Alexandre Silveira de Oliveira, Minister of Mines and Energy of the Federative Republic of Brazil, which will join the OPEC+… starting January 2024,” OPEC said in a press release.
OPEC+ was born in late 2016 when Russia and nine others joined forces with the Saudi-led OPEC to prop up falling prices.
“Considering that Brazil is a large oil producer and is driving oil production growth it is important to have them on board, but it seems that they are not cutting production like Mexico, so would conclude with: good for OPEC+, less relevant for oil market balances,” UBS analyst Giovanni Staunovo said.
The 23-member OPEC+ is a motley crew of countries: Saudi Arabia and Iran are bitter rivals, South Sudan and Libya have been wracked by civil wars and others such as Venezuela are mired in economic crises.
The cartel faced its biggest crisis in 2020 as countries locked down due to the COVID-19 pandemic, sending oil demand plunging.
The group agreed in April 2020 to slash output by 9.7 million barrels per day in order to boost sagging prices.
It began to raise production again in 2021 as the market improved.
In the most recent meetings amid plunging prices, OPEC+ members have announced voluntary cuts to boost prices.
Since the end of 2022, the alliance has implemented supply cuts of about five million barrels per day (bpd) with Saudi Arabia taking the lead.
