Nigeria Faces Potential Oil Production Cut: OPEC Deadline Miss and Quota Reduction Looms
Nigeria faces a potential reduction in its 2024 oil production quota to 1.38 million barrels per day after failing to meet the OPEC deadline. Tensions within OPEC+ escalate as disagreements among African members persist regarding oil production cuts.
In June 2023, sub-Saharan African OPEC+ members, including Nigeria, acknowledged the likelihood of reduced quotas for 2024 unless they could demonstrate increased production capacity before November. However, Nigeria's crude oil production figures since June, with the highest recorded at 1,350,573 barrels in October 2023, fall short of the assigned 1.78 million barrels per day quota for 2023.
The potential new quota poses both challenges and opportunities for Nigeria. The country has been making progress in combating crude oil theft, a significant factor hampering production. However, a lower quota could hinder the oil sector's growth, impacting foreign exchange contributions and reducing investments in the upstream oil sector.
S&P reports indicate that Nigeria faced a significant production gap in the first half of 2023, with an average daily oil output of 1.38 million barrels, falling short of both the OPEC-assigned quota and its actual capacity of 2.2 million barrels per day. This production shortfall reflects broader challenges across the continent, including underinvestment in older oil fields, divestments by major international players, insufficient exploration efforts, and operational challenges.
In Nigeria, rampant crude oil theft remains a significant hurdle, impacting production levels and contributing to the nation's struggle to reach designated quotas. These challenges collectively hinder African countries' ability to meet oil production targets, limiting their potential contribution to global oil markets.
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