Nigeria and Angola, the biggest oil producing countries in sub-Saharan Africa, are set to increase daily oil output by thousands of barrels to address their respective economic needs.
The Organization of Petroleum Exporting Countries and allies (OPEC+) at its last meeting granted Nigeria approval to increase production to 1.774 million barrels per day (bpd), from 1.685 million bpd it was allowed previously.
“It’s happened. I’ve not heard of any other changes to the agreement,” an OPEC delegate was quoted as saying in a Reuters report. The increase comes under a petroleum production quota deal renewed by member states of the organization last December.
The consideration to raise Nigeria’s allocation is believed to be based on the coming on stream of the Egina offshore oilfield owned by French multinational Total. Production at the field started in January this year, meaning it was not factored into the determination of the quota structure.
Meeting budget needs
Nigeria has always failed to deliver its share of OPEC cuts, reports say. According to the International Energy Agency (IEA), the country overshoot by 400 percent in August, producing 1.866 million bpd, far above the new quota.
Moreover, the West African nation, which is the continent’s largest oil exporter and biggest economy, factored in a production quota of 2.18 million bpd at $57 per barrel to fund its 2020 budget.
Over time, Nigeria has made attempts to tweak the quota agreement in order to accommodate its expanding oil industry. The country adds condensates – an ultra-light variant that is not counted by OPEC – into its production output.
But with the difference between 2020’s oil production assumption and the new OPEC quota being around 400,000 bpd, Nigeria could adhere to the ceiling as well as meet its budget requirements for the coming year.
Angola’s increase due to drought
The government of Angola, the second-biggest oil producer in sub-Saharan Africa, has said it will raise oil production by over 35,000 bpd from 2020. The disclosure was made by President Joao Lourenco said in a State of the Nation Address to Parliament yesterday.
The move translates to an increase in oil output from 1,401,235 bpd to 1,436,900 bpd and is aimed at saving the economy from a devastating drought.
Like several other oil-dependent African nations, Angola is affected by the decline in oil prices. The natural resource makes up half of the country’s economic wealth, 95 percent of exports and 80 percent of government revenue.
The plunging oil prices could not have come at a worse time as Angola is struggling with a severe drought. The disaster has pushed cattle farmers to penury, both commercial and traditional, without the needed grazing lands.
Although both oil producers in Africa are banking on the increase in production quotas to get additional revenue for meeting their economic needs, the outlook for global oil demand for 2020 is gloomy.
The IEA in a recent report cut its oil demand forecast for next year as the weakening global economy continues to slow consumption growth. And there are suggestions the OPEC+ group may need to make deeper output cuts when they meet in December.