by Ahmad Ghaddar
London (Reuters) – Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman unveiled one of the biggest reforms to the Organization of the Petroleum Exporting Countries (OPEC) in recent years in early June. , presented as a reward given to countries that invest in their oil industry.
This change allows larger production quotas to be granted to OPEC member Gulf countries, such as Saudi Arabia, the United Arab Emirates and Kuwait, at the expense of African nations such as Nigeria and Angola.
Production quotas and reference levels, from which the production cuts the organization can decide to put in place are calculated, have been a sensitive subject within OPEC for decades, with most producers wanting to obtain higher quotas in order to be able to export more oil.
This rebalancing of quotas is likely to increase over the next few years, as the major oil companies in the Middle East increase their investments, while production decreases in African countries which are having difficulty attracting foreign investment.
Gulf producers, who hold the scarce excess production capacity on the world oil market, have long dominated OPEC.
Their power and influence have already grown over the past 15 years through increased production, while African production has fallen due to declining foreign investment.
Unlike those in the Gulf, African producers depend heavily on investments from international oil companies, which have preferred to invest in recent years in American shale deposits or in the gigantic oil fields of Brazil or Guyana.
In May, the share of Saudi Arabia, the United Arab Emirates and Kuwait in total OPEC production was more than 10% higher than it was 15 years ago, at 55%, according to OPEC, while the total share of Nigeria and Angola fell from more than 3% over the period, to less than 9%.
For Nigeria, “production capacity continues to be constrained by operational and security issues, combined with low levels of investment,” according to analysts at consultancy firm Woodmac.
Development of new fields and recent discoveries in Angola will not be enough to stem long-term capacity declines, they added.
Conversely, Saudi Arabia and the United Arab Emirates have plans in place to significantly increase their production capacity to 13 million barrels per day (bpd) and 5 million bpd, respectively, by 2027, compared to around 12 and 4 million bpd currently.
On June 18, Kuwait said it would increase its production capacity by 200,000 bpd by 2025 to reach 3 million bpd.
Capacity additions from the three Gulf countries over the 2020-2025 period total 1.2 million bpd, double the capacity Nigeria and Angola are expected to lose over the same period, according to Reuters calculations.
REVISION OF QUOTAS
At its June 4 meeting, the Organization of the Petroleum Exporting Countries and its allies, led by Russia, (OPEC+) revised the production quotas of the majority of its members.
“Ultimately, those who invest, not this year, but the years to come, for 2024 and 2025 and beyond, will see their investment valued through this reform,” Prince Abdulaziz said.
A source close to OPEC+ believes that the reform was necessary to create a fairer system that better reflects the real production capacities of the various member countries.
Richard Bronze, head of geopolitical analysis at Energy Aspects, explains that this change could solve OPEC’s credibility problems, as the production cuts decreed by the organization are not necessarily passed on to the markets.
“The actual increase or decrease in supply was often well below the figure announced by OPEC, causing the market to doubt the organization’s ability to handle market fundamentals,” he said. precise.
(Report Ahmad Ghaddar, French version Corentin Chapron, edited by Kate Entringer)
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