With coronavirus ravaging the world, one of the victims is the economy of the world in general and Nigeria’s in particular.

In March, the Finance Minister, Zainab Ahmed, revealed the preparedness of Nigeria to review the 2020 budget using the $30 per barrel price benchmark as against $57 per barrel “used for the passage of the budget by the National Assembly last December.” The fear is even more that the benchmark may plummet further.

However, the anxiety over oil benchmark as it would affect budget and projects may soon evaporate. Reason: Members of the Organisation of Oil Exporting Countries (OPEC) have agreed to cut oil output and, by so doing, stabilize price per barrel.

Below is a story in that regard:

OPEC’s Historic Deal is a Victory for African Oil Companies, Investors and Empowers the industry to beat COVID-1

OPEC Headquarters, Vienna, Austria

On Easter Sunday, April 12th, 2020, Nigeria joined its other OPEC counterparts to bring into effect the agreement to cut 9.7 Million Barrels of supply following the alignment of Mexico. The intervention of the United States of America resulted in Mexico agreeing to a cut of 100 KBOPD and to be complemented by an additional 300 KBOPD by US Producers. This will enable the rebalancing of the oil markets and the expected rebound of prices by $15 per barrel in the short term.  This also promises an appropriate balancing of Nigeria’s 2020 budget that has been rebased at $30 per barrel.

As agreed, Nigeria will join OPEC to cut supply by 9.7 Million Barrels per day between May and June 2020, Eight (8) Million Barrels per day between July and December 2020 and Six (6) Million barrels per day from January 2021 to April 2022, respectively.  

Based on reference production of Nigeria of October 2018 of 1.829 Million Barrels per day of dry crude oil, Nigeria will now be producing 1.412 Million Barrels per day, 1.495 Million Barrels per day and 1.579 Million Barrels per day respectively for the corresponding periods in the agreement.  This is in addition to condensate production of between 360-460 KBOPD of which are exempt from OPEC curtailment.

Thus, the African Energy Chamber congratulates OPEC and OPEC+ Member countries on reaching a much-needed historic deal to cut production and maintain market stability. After repeatedly calling and lobbying African producers to join OPEC in restoring market stability, the Chamber is particularly pleased to see the wide support for OPEC amongst all of African producing countries.

On Easter Sunday, OPEC and OPEC member countries finally decided to cut oil production by 9.7 million barrels a day starting on May 1st, 2020 and until June 30th, 2020. From July 1st, 2020, production cuts will be readjusted to 8 million barrels a day until the end of the year. Finally, OPEC and OPEC member countries have agreed on a production cut of 6 million barrels a day from January 1st, 2021 until the end of April 2022. The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and the Russian Federation, both with the same baseline level of 11 million bopd.

“The spirit of cooperation has triumphed and under the leadership of Africa’s own son, H.E. Mohammed Sanusi Barkindo, OPEC reaches yet another truly historic deal for our continent and for global energy markets,” stated NJ Ayuk, Executive Chairman at the African Energy Chamber. “This clearly shows that in times of critical need we can set aside our differences and unite behind historic deals that will make the difference at home for our companies and our employees. The Chamber will continue to put all its resources behind supporting this coordinated industry effort beyond 2022. Compliance is key, so let’s get to work,” added Mr Ayuk.

The decision is truly historic and builds upon the Declaration of Cooperation of 2016 and takes production cuts levels even higher. Over the years, it is the joint efforts of OPEC member countries along with their allies within OPEC+ that have resulted in building an industry coalition able to put the interests of the market first. African producers are playing a key part in this effort, bot via OPEC member countries Nigeria, Angola, Algeria, Libya, Gabon, Equatorial Guinea and Congo, but also thanks to the support of additional producers such as Egypt, South Sudan, Chad or Niger.

-Distributed by APO Group on behalf of African Energy Chamber