Yesterday, Organisation of Petroleum Exporting Countries (OPEC) released its monthly oil market report for December which showed that Nigeria’s oil production dipped to a new low extending 3 months of consecutive decline. Specifically, Nigeria’s daily crude production (excluding condensates) for December 2019 fell to 1.57mb/d from 1.66mb/d in November 2019.
Furthermore, Nigeria’s average daily production (excluding condensates) in 2019 came to 1.73mb/d. Adding condensates production which the Department of Petroleum Resources (DPR) pegged at between 414,000 – 497,000 b/d (IEA estimates 220,000 – 250,000 b/d) brings total average production in 2019 to roughly 2.2mb/d in line with Mele Kyari’s declaration at the Atlantic Council Global Energy Forum.
Nigeria’s oil production quota was previously placed at 1.69mb/d which was not complied with. However, following consultations with the cartel in October 2019, the production quota was lifted to 1.77mb/d.
In recent times however, the country’s production has been below quota. NNPC boss, Mele Kyari has since declared the country is directing its upstream efforts at improving natural gas liquids and natural gas to better comply with OPEC’s quota since OPEC’s quota excludes production of NGLs
We think Nigeria’s decision to comply with its OPEC+ quota bodes positively for the global oil market without necessarily hurting local targets.
The 2020 budget assumption of 2.18mbd oil production now looks achievable provided condensates production in line with DPR estimates can be maintained.
However, concern remains how Nigeria can exploit its rich deposits of NGLs given dearth of adequate technological infrastructure.