Juliana Taiwo
26 November 2008
Abuja — The Federal Government yesterday threatened that Nigeria may stop further cuts in crude oil production as directed by the Organisation of Petroleum Exporting Countries (OPEC) if other member countries within the cartel fail to obey the directives.
OPEC, stung by what it called "a dramatic collapse" in crude oil prices, had announced last month after its 150th meeting in Vienna, Austria, that it would reduce output by 1.5 million barrels a day, deeper than expected, and suggested that more production cuts were coming as the global economic slowdown undermined oil demand.
A number of member states of OPEC have announced cuts in crude oil production over the past few weeks.
The announcement was made after an unusually brief emergency meeting of member states on October 24th. The cut was predicted to be the deepest since 2003, but the meeting failed to provide the price cushion that OPEC members had been hoping for.
Fielding questions from State House Correspondents before the weekly Federal Executive Council (FEC) meeting, the Minister of State Energy (Petroleum), Mr. Odein Ajumogobia (SAN), warned that not until all the member countries comply with OPEC directive for an earlier cut, Nigeria would not carry out any further production cut of daily crude production.
Following the directive, the Minister said Nigeria had cut its daily crude oil production by 113,000 barrels per day (bpd) pegging its daily production at 2.05million bpd.
"Our position is that we want to ensure that everybody has complied with the previous cut. We have complied and we were asked to cut 113,000 bpd and we have cut 113,000 bpd. At the last meeting when there was a cut we found out that a lot of countries did not comply, so before we look at any further cut, we first want to be sure that everybody has complied.
"We are producing what we agreed to produce which is 2.05million bpd even though we have a capacity of significantly higher than that but we have complied with the cut strictly," he said.
Ajumogobia said it is only when everybody has cut that a decision would be taken to know if there is need for any further production cut.
Asked if non-compliance by some member states was not an indication of a divided house, he said: "I think when you have a group and have diverse interests within the group, sometimes it is not and that is why we have been very successful in notwithstanding the diversity of interests, we are able to build consensus."
He said Nigeria would not break ranks and would continue to work with other OPEC member states for the unity and common goals of the organisation.
"Nigeria will not break ranks with the consensus but as I said we want to make sure that there has been compliance with the previous directive from OPEC," Ajumogobia said.
He said if Nigeria finally agreed to a further cut it would affect the budget but noted that the excess revenue made previously would help mitigate the anticipated loss.
"If we cut it will affect the budget. It will affect the total revenue. The revenue is based on the benchmark plus volume, so if it comes to volume you may just have to adjust the budget again but I don't think we need to do that because we can always mitigate it based on the fact that we have significant excess from the high price and we can probably mitigate some of that loss," he said.
"There are two issues there, price and volume and for a country like Nigeria that depends on the commodity, we depend on both. For that reason, naturally that is the thinking of everybody, nobody is anxious to cut and that is what I am saying that they quoted me out of context," he said.
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