Nigeria has signed a new pact with other OPEC+ counterparts to cut down its oil production in a bid to stabilize the fluctuating oil price as a result of the global Covid-19 pandemic.
Nigeria is participating in this oil cut commitment following the framework of the Declaration of Cooperation entered on 10th December 2016 and further endorsed in subsequent meetings as well as the Charter of Cooperation signed in July 2019.
Nigeria joined OPEC+ to cut supply by up to Ten (10) 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. The agreement awaits close out of ongoing engagement with Mexico to agree on its full participation.
It is expected that this historic intervention when concluded will see crude oil prices rebound by at least $15 per barrel in the short term, thereby enhancing the prospect of exceeding Nigeria’s adjusted budget estimate that is currently rebased at $30 per barrel and crude oil production of 1.7 Million Barrels per day. The price rebound may translate to additional revenues of not less than $2.8 Billion Dollars for the Federation.
It is therefore pleasing to note that despite the production curtailments that this historic agreement will entail, all planned industry development projects will progress as they will be delivered after the termination of the 9th OPEC/Non-OPEC Ministerial Meeting Agreement on adjustments in April 2020.