Why OPEC did not grant Nigeria further exemption in output cut deal by Kachikwu

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has clarified that the Organisation of Petroleum Exporting Countries (OPEC) did not grant Nigeria further exemption in the cartel’s output cut deal because the country did not request for further exemption.

Kachikwu told THISDAY on the sidelines of the recent OPEC meeting in Vienna, Austria, that while Nigeria cannot be said to be comfortable with its current oil production levels, it could not ask to be exempted from the cut.

“We didn’t ask for exemption; we wanted to make sure everybody shared in the pain. If some happenstance occur, you are expected to come back to ask for exemption,” said Kachikwu, who noted that the country had been exempted twice in the last deals that were reached.

Collectively, OPEC and their non-OPEC allies agreed to cut their outputs by 1.2 million barrels of oil per day (mbd), with OPEC countries accounting for 800,000 barrels a day (bpd) of the cut, while non-OPEC will cut 400,000 bpd.

Kachikwu, told THISDAY that Nigeria could contribute up to 40,000 bpd to the 800,000 bpd OPEC will take out.

He said this represented about 2.5 per cent of the 1.7mbpd current production level of Nigeria.

Speaking on the output deal negotiations, he said: “We had to navigate that. Nigeria had the unique responsibility of having to navigate the Saudis who we get along very well with, and the Iranians, who we get along very well with, and then try to sort of forge them to decide over and by the time we left yesterday (Thursday), some had agreed on the volume of cuts; some on the concept of cut or whether or not the language will be written into the resolution that will be announced.”

According to him: “It was more of the mechanics of how do you present it to the market as opposed to the substance of the resolution itself and that was what we broke yesterday and decided to take a break and come back with cool heads today.”

He stated that though the exemption was available to a specific number of countries, others could still ask for an exemption on special occasions.

“If you are a unique country and your unique circumstances require that you will be given attention in a particular month to be exempted from that cut, you will write to the President of the OPEC Assembly and he will review that and come up with a decision,” Kachikwu explained.

He also provided an update on the payment of the cash call arrears owed International Oil Companies (IOCs) by Nigeria, stating that the repayment as agreed was up to date.

“I have gotten the concept of cash calls done; I have gotten the approvals and handed over to the NNPC which is executing this. The indications I get from oil companies is that the rules in terms of the arrears payment are followed.

“In terms of currency of cash calls, they are fairly up to date; now whether they have navigated fully into the language of the cash call formula, I don’t know; I don’t think they have it and that is something that we need to do,” he said.

Continuing, he added: “Some of that is due to systemic accounting challenges, trying to meet FAAC requirements and all that, but I think ultimately, they need to navigate to what has been approved so that the oil companies can get their monies as at when due and have confidence in the sector and invest.

“In the short term, it may reduce what gets into FAAC, but in the long term it will blow up what goes into FAAC. What is important is that the feelings I get from the oil companies is that certainly, they are in a comfortable space today than they were many years ago,” Kachikwu added.

Advertisements