When OPEC agreed to exempt Nigeria from its oil production-restraint deal final 12 months, it knew the nation confronted an enormous problem in recouping output misplaced on account of militant unrest.
As tensions subside and the nation pumps nearer to regular ranges, one other dilemma looms for the producer group because it continues efforts to eradicate a price-sapping oil glut – the way to rely Nigeria’s crude output with out mixing in condensates.
The reply might decide when – and certainly if ever – Nigeria has to chop or curtail oil manufacturing, its key supply of overseas forex.
While Nigeria promised to cap at 1.eight million barrels per day (bpd) as soon as manufacturing “stabilizes”, that restrict exempts the entire West African nation’s condensates. And nobody appears to agree on how a lot of that ultra-light oil it pumps.
“Previously, as a result of entire concern of militancy, quotas weren’t a problem,” stated Gail Anderson, analysis director at consultancy Wood Mackenzie. But now, “if you happen to begin fascinated about OPEC cuts, then the definition of crude and condensate turns into fairly vital”.
Nigeria, together with OPEC peer Libya, was exempt from cuts on account of militancy in its Delta area that slashed output from 2.2 million bpd to as little as 1.2 million bpd final 12 months. The assaults have abated, with no main incidents since January.
Nigeria’s output has additionally rebounded, and secondary sources equivalent to consultancies and price-reporting companies quoted by OPEC stated it edged above 1.eight million bpd in August and September – reinstating the nation as Africa’s largest oil exporter.
But Nigeria has stated a few of that complete included condensates, an ultra-light oil that’s not counted as a part of its promise to cap.
Oil minister Emmanuel Ibe Kachikwu instructed Reuters in July that condensates contributed 450,000 bpd to Nigeria’s manufacturing that month.
The determine exceeds exterior estimates for condensate manufacturing starting from 200,000 to 250,000 bpd and suggests Nigeria’s personal condensate definition might maintain it out of any cap.
“Definition issues and all producers are taking part in with definitions,” stated Ehsan Ul-Haq, director of crude oil and refined merchandise at Resource Economist Ltd, a consultancy.
Neither Nigeria’s state oil firm, NNPC, nor its Ministry of Petroleum, responded to Reuters requests for touch upon its manufacturing or definition of condensate.
WHAT‘S IN A NAME?
Oil exists in lots of varieties of high quality – from heavy, sulfur-rich Canadian oil sands to ultra-light shale oil.
Condensates are liquefied as soon as extracted from high-pressure reservoirs, the place they exist as a gasoline. Nearly all oilfields produce some condensates, normally in small quantities. Once it turns into a liquid, there isn’t any extensively agreed approach to differentiate condensate from crude.
The Organization of the Petroleum Exporting Countries doesn’t publish a determine, reporting solely the crude output of its 14 members, and NNPC additionally publishes no condensate numbers.
Asked how OPEC would outline condensate if it wanted to find out Nigerian manufacturing volumes, a spokesman for the producer group stated the definition was primarily based on “worldwide requirements” equivalent to these of the American Petroleum Institute.
But these requirements deal with whether or not the oil was a gasoline when extracted. Once liquefied, there isn’t any extensively agreed rule.
Often – together with in Nigeria – condensates are blended into crude exports, and never tracked rigorously. The concern briefly flared when the U.S. shale revolution led to a spike in oil manufacturing, and extra would-be exporters sought to ship oil overseas as condensate, circumventing a ban on exports of crude. [reut.rs/2yzrJA8]
Washington lifted its export ban earlier than it might craft a clearer definition.
This lack of consensus on what constitutes condensate makes it tough to find out how a lot any nation produces.
“Nigeria does produce fairly a little bit of condensate, however other than Akpo it’s not likely measured as a result of it’s blended into crude,” Wood Mackenzie’s Anderson stated.
LABELS AND EXPORTS
Akpo, the one substantial Nigerian grade that…