Nigerian-barrels Nigeria produces Condensates

OPEC BULLY NIGERIA INTO SUBMISSION

Nigeria have been brutally knocked back by OPEC in its attempt to maintain an exemption for its condensates production. OPEC are no longer prepared to exempt condensates counting toward its current quota. Specifically production from the Agbami field. The inescapable conclusion must be that it is now time for Nigeria to leave OPEC. The reality is that it is long overdue, Nigeria derive no tangible benefit from its membership. It is a position I have held for a long time, OPEC's medicineis worst that the disease it purports to cure.

OPEC's stance should come as no surprise. Earlier this year In April, I anticipated the inevitability of the current outcome in an article I wrote at the time (https://t.co/UWbJJzWEzX?amp=1) . The folly of an over eager Minister of State far too eager to ingratiate himself by supporting other county's interests at the expense of his own . Nigeria has long exploited the ambiguity around the contested definition and thus classification of condensates and has been able to exempt the production of these streams from its previous OPEC quotas.

Condensates are hydrocarbons which exist as gas in the ground butcondense into a liquid at the earth's surface. OPEC's reason for now including condensate is farcical, far fetched and makes no sense. According to the OPEC Secretariat (coincidentally run by a Nigerian) three of the six secondary sources that provide data estimates on OPEC+ compliance levels count it as crude.

My simple view is that any such decision given its gravity must be a unanimous one. If Nigeria do not have a say in such a fundamental matter then why continue to be subject to such quotas. After all Russia are able to remove their condensate production from their quotas.

OPEC+ Joint Ministerial Monitoring Committee (JMMC) further warned Nigeria in no uncertain terms that any attempt to circumvent or dilute its compliance with current quotas would result in large producers abandoning their quotas too. A crude attempt to 'bully' Nigeria into submission.

However it would appear that it is not only Nigeria that has issues with the quota regime. The UAE are considering their position as an OPEC member sources with knowledge of the matter have revealed. They are apparently no loner convinced of the usefulness of OPEC.

It is worth considering that Saudi Arabia's crude oil production in the first 9 months of 2020 was only 4.5% lower than the same period last year. Which is clear evidence to support my suspicion that they cheated in setting their production base used to calculate quotas.

The original sin however is that Nigeria's quotas were not set properly in the first place. It is totally unacceptable that Nigeria with a population of 200 million plus should have a quota less than 1/6th that of Saudi Arabia. Russia has a population of 148 million yet has a quota five times that of Nigeria.A complete failure of statecraft and a missed opportunity. It reminds me of Brutus quote to Cassius in Shakespeare's Julius Caesar

" There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.

It seems highly likely given the uncertain end to the recently concluded Joint Ministerial Monitoring Committee meeting, that an extension and not a further reduction as planned to the current production cuts is a real possibility. If that were not bad enough low cost, short-haul producers discount their barrels to the extent it prices Nigerian crude out of the market. Nigeria needs to accept the battle for market share is adversarial, and will become more so as the global fossil fuel market contracts. It needs toradically change the way it sells its oil and the first step is to leave OPEC with immediate effect. 


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Tuesday, 02 March 2021
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