Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Mohammed Barkindo, has urged member countries not to flout last April’s deal to cut their crude oil production quotas, despite recent noticeable improvement in the international market.
However, to ensure that statutory activities that would guarantee continuous optimum operations at the Bonga export terminal are executed, Shell Nigeria Exploration and Production Company (SNEPCo) has shut down the terminal used to evacuate crude oil from the 225,000 barrels per day capacity Bonga deepwater oilfield for routine maintenance.
Barkindo, who spoke with Energy Intelligence, according to the international oil cartel yesterday, also advised OPEC+ members to remain committed to the pact, triggered by a number of factors, including the COVID-19 pandemic, not to “take their foot off the gas,” now that things appear to be picking up.
Nigeria announced in April that it will join OPEC+ to cut global supply by 9.7 million barrels per day between May and June 2020, 8 million bpd between July and December 2020 and 6 million barrels daily 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 360,000 and 460,000 bpd of which are exempt from OPEC curtailment,” Minister of Petroleum, Mr. Timipre Sylva, had said.
But Barkindo expressed optimism that with China gradually opening up its economy and countries easing lockdown and implementing stimulus packages, it was only a matter of time before the oil market rebounds.
He said: “There are tentative signs of recovery; we do believe that the worst is behind us.
“Nevertheless, we also realise that we cannot lose our laser focus on helping bring supply and demand back into balance and providing a more stable market in the coming months.
“This is not the time to stand back and admire what has been achieved over the past weeks. We will not take our foot off the gas.”
According to the secretary-general, the OPEC Secretariat was closely monitoring the gradual pickup in demand.
“Indeed, some of the demand contraction in 2020 may also be mitigated sooner, if the extraordinary government stimulus packages around the world accelerate a faster economic rebound,” he added.
However, he expressed confidence that OPEC nations and their non-OPEC allies will comply with the agreement, which at the time called for combined production cuts, culminating in lower volumes before April 2022.
Barkindo noted that members of the group were talking “on an almost daily basis” as they implement and monitor the cuts.
“There is also widespread recognition that there is no short-term fix. The OPEC+ agreement’s scale and scope underscore the fact that this is also a platform for recovery and future growth,” he said.
With a decent recovery in the last couple of days, there are early signs that members of the alliance are reducing their output and getting close to their targeted levels, including some countries that have failed to comply with past agreements.
In addition, Saudi Arabia recently announced an additional voluntary cut of 1 million b/d for June, with the United Arab Emirates, Kuwait and Oman also agreeing to chip in with additional voluntary reductions in crude oil production.
Barkindo who applauded the move said it “underscores the leading role that these countries are playing in helping expedite the rebalancing process.”
He, however, declined to comment on what might happen at the next meeting of senior OPEC+ officials, which is scheduled for June 10 to review new developments in the market.
As the agreement currently stands, the alliance’s combined production cuts are set to fall to 7.8 million b/d in the second half of this year, although there are indications that the current cut volumes may prevail till the year end.Barkindo added that if the current industry slump leads to an extended period, it could potentially have harmful effects on oil supply and prices and reduce upstream investment.
“Investments are the lifeblood of the oil industry. A lack of investments today and in the near future could have major implications for both producers and consumers in the medium and longer term,” he said