At its 171st meeting held at Organization of the Petroleum Exporting Countries (OPEC) headquarters in Vienna on Wednesday 30th November 2016, OPEC reached a landmark deal that will effectively cut production by about 1.2 million barrels per day, or about 4.5 percent of current production, to 32.5 million barrels per day.
This agreement follows an earlier meeting held in September in Algeria were each member country reached a consensus on the need to cut production. This will be the first time since 2008, that OPEC would be accomplishing such a feat which is expected to tackle the key challenge of low oil price in the international market which has affected the global economy with most OPEC member countries including Nigeria feeling the impact.
Member countries at the meeting agreed on the deal where considerations of the cartel offered to Iran, Libya and Nigeria would mean that in 2017, total production might likely increase, even as other members seek to cut output in the first quarter of next year. In the agreement where the countries are exempt from the production, Nigeria was accommodated due to some of the Oil and Gas facilities damaged by militant attacks in recent months.
Dr. Emmanuel Ibe Kachikwu, Honourable Minister of State for Petroleum Resources, led Nigeria’s delegation at the meeting and the negotiation which saw Nigeria get an exemption from the production cut. The concession was given as the country has been through production challenges recently due to the vandalism of oil and gas infrastructure that has negatively affected the country’s ability to produce oil optimally in the recent past.
This deal will obviously enhance the prospects for the Oil and Gas industry with the impacts already being felt as oil prices surged more than 8% Wednesday afternoon in London, hitting a high of $51.84 a barrel. A stable increase in oil prices is one of the rewards that the deal will produce and would most likely contribute positively to the stimulation of the economies of member countries including Nigeria who are presently undergoing challenges.
The details of the deal saw Saudi Arabia agree to take on the highest burden of cuts—a 486,000 barrel a day to its output, while persuading Iraq to reach a decision to reduce its output, as well as getting non-OPEC producer Russia on board for a 300,000 barrel-a-day cut, according to OPEC.
This landmark deal is coming at a time when Dr. Ibe Kachikwu the Honourable Minister of State for Petroleum Resources is working assiduously with Ministers from other OPEC member countries and Nigeria’s Dr. Mohammed Sanusi Barkindo as the Secretary General of the Organization, to steer the organization to achieve and sustain unity and competitiveness in the global energy market.
The cut is subject to a review after six months, with a possible rollover for another six months on the recommendation of a ministerial monitoring committee of three OPEC counties, namely Kuwait, Venezuela and Algeria. The countries are to closely monitor the implementation and compliance with the agreement.