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  • Should Nigeria Restrict Its Oil Supply?

Should Nigeria Restrict Its Oil Supply?

Mar 26 2018 Read 1100 Times

Fronted by the biggest oil producers on the planet, OPEC has serious sway when it comes to dictating global crude supply and prices. However, while the cartel is pushing for an oil output embargo in a bid to bolster prices, Nigeria is championing a different approach.

The West African nation plans to boost output by 250,000 barrels per day, which would put it on track to hit its 2020 target of 2.5 million barrels per day. Shoreline Group, one of Nigeria’s biggest independent oil producers is a driving force, with plans to increase output by 50% by the end of 2018.

A conflict of interests

Already, national crude output is at the highest levels seen in over two years, with Nigeria producing almost 2 million barrels per day in January. As well as ramping up output, Nigeria is also kickstarting production on a new large-scale offshore oil field. When it hits full capacity, it will churn out 200,000 barrels per day.

Simultaneously, the Nigerian government has pledged to join a global pact designed to restrict oil supply. The embargo is being led by Saudi Arabia and Russia, and saw Nigeria agree to cap output at 1.8 million barrels a day in 2018. Basically, the Nigerian government is promising to curb production, while the country's independent oil producers are turning up the heat.

Experts maintain that if OPEC doesn't succeed in reigning in Nigerian oil production it could trigger a knock-on effect. The pact could dissolve, which would allow nations like Iraq and Angola to boost production capacity. There are also concerns that Russia could sidestep the pact, especially after a move that saw the country drastically increase output just before renewing their production curb deal with OPEC.

US net energy exporter status threatens Nigerian crude

Some critics maintain that failing to comply with OPEC's production cut could be a big mistake. Currently, the US is one of the biggest importers of Nigerian crude. Though according to the latest World Energy Outlook released by the United States Energy Information Administration, America could emerge as a net energy exporter by 2022. As a result, this would halt Nigerian imports and leave the country with a surplus of oil, plus a black mark from OPEC.

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