By Obinna Uballa
Notable economist and Managing Director of Financial Derivatives Company Limited, Mr. Bismarck Rewane, has cautioned that Nigeria’s plan to ramp up crude oil production to 2 million barrels per day (bpd) before the end of 2025 is inconsistent with its OPEC quota and could have serious implications for the country’s relationship with the cartel.
Nigeria’s official OPEC quota stands at 1.5 million bpd, yet the Federal Government set a production target of 2 million bpd in the 2025 budget.
The New Diplomat had reported that at the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) Energy and Labour Summit (PEALS) in Abuja on Wednesday, Minister of State for Petroleum (Oil), Heineken Lokpobiri, disclosed that current output has reached 1.8 million bpd, an 80 percent increase over three years.
Lokpobiri added that the government is working to hit the 2 million bpd target before year-end, despite acknowledging that OPEC has already queried Nigeria for marginally exceeding its quota. He explained that the excess was largely due to condensate production, which is not subject to OPEC limits.
“We remain a committed member of OPEC, but we also have an obligation to increase production to meet domestic, regional, and global demands,” Lokpobiri had said.
However, speaking on Thursday as a guest on Channels TV business programme monitored by our correspondent, Rewane warned that the government’s stated aspiration to reach 2 million bpd sends the wrong signal to OPEC and could attract penalties.
“Nigeria has a quota of 1.5 million barrels per day, and we have exceeded that quota in the last two months by about one or two thousand barrels,” Rewane explained. “But cumulatively over the last 12 months, we have underproduced. In other words, if we were to plough back the production shortfall in the past year, we still have millions of barrels to produce to stay in compliance.
“Having said that, in an oligopoly where there is a gentleman’s agreement, Mr. Lokpobiri’s statement that we intend to comply with the quota is important. But when you look at the government’s aspiration to produce up to 2 million bpd, that is in direct contrast and a complete negation of our OPEC commitment.
“Without OPEC or OPEC+, oil prices could crash to as low as $20 or $30 per barrel, which would hurt everyone. So it is important that we remain compliant. If you make provision for what we produced in the last 12 months, we are still way below the quota. But with quotas, it is not in relative terms; once you miss it, you have missed it and must comply going forward.”
Responding to a question on whether Nigeria could lobby OPEC for a higher quota before implementing its 2025 production target, Rewane said the government should first secure such concessions before making public commitments.
“The point is that we have a little leverage in OPEC because our economy is fragile and our per capita income is low. We need to convince other members that our needs are significant,” he said. “I believe OPEC will give us some leeway, but we must get that approval before making statements about hitting 2 million bpd. By announcing this target, you are already putting OPEC on notice that you want to default, and there are penalties for that.
“We have to be very careful about the sound bites from government officials. If we plan to default, then we might as well leave OPEC – but that is not in our best interest. What we need is better coordination and diplomacy.”
