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Nigeria has, more than ever before, been exposed as a country that is unable to meet its OPEC’s quota of 1.772 million.
It is unable not take advantage of the looming Russian oil ban to ramp up its revenue.
Following the war between Russia and Ukraine, the European Commission recently proposed an oil embargo on Russian crude oil and refined products as part of the sixth sanction package being discussed by the European Union.
The crude oil embargo would come into effect after six months and the refined product embargo would come into effect at the end of this year.
While the European Union alone imports some 3.5 million barrels of crude oil and refined products from Russia, the country’s supply quota in OPEC’s cut deal is 7 million barrels per day.
Since a supply gap would be created when Russia’s ban takes effect, Europe is currently putting pressure on OPEC to increase output to compensate for the loss.
However, OPEC has refused to increase output due to its alliance with Russia in the ongoing Declaration of Corporation, DoC, which has been in place since 2014. It is rather warning that “no capacity in the world can replace Russia’s oil”.
Nigeria, also being one of OPEC’s strongest members, is torn between working to increase exploration by all means in order to take advantage of Russia’s oil ban to earn more revenue, and remaining loyal to OPEC’s quota.
Yet, Nigeria’s eagerness to latch on the opportunity about to be created by the ban may be a mere wish, especially since the country currently battles vandalism, oil theft, low investments, technical issues and other forms of menace, which have kept it from producing more than 1.2 million barrels per day despite an opportunity that allows it to churn out more.
Although OPEC has increased output quota twice this year, Nigeria is unable to meet its target, as the country’s output hovers around 1.2 million barrels per day for the past two years.
Europe and Asia are Nigeria’s largest buyers of crude oil. Between October and December 2021, Nigeria exported over N4 trillion worth of crude oil. In the fourth quarter of 2021, crude oil exported to Europe amounted to about N2 trillion, while exports to Asia followed with around N1.4 trillion.
If Russia’s ban comes into effect, Nigeria could be one of those countries that Europe would turn to Nigeria for succour.
However, experts say the country is unprepared.
An oil and gas expert, Dr. Dauda Garuba, said Nigeria did not prepare for the coming opportunity posed by the Russian ban, and therefore, would not, in any way, take advantage of it.
“Nigeria is not, in any way, positioned to take advantage of what’s happening now because it is already under-producing,” he said.
According to him, the issue at hand was a global one, “and even OPEC has already expressed its inability to bridge the gap that will be created by the ban. Nigeria didn’t prepare for this because, since 2017, the country’s reserves have remained static at 37 billion barrels. Although the government expressed interest to increase it to 40 billion barrels, this is all word of mouth. Practically, the government is not doing anything about it. What we can do is just to sit and watch the turn of events. It’s an unfortunate situation but it’s the reality,” he said.
International oil companies have begun to divest assets in a bid to focus on renewable sources of energies.
