US puts pressure on West Africa to increase oil production

Jul 29, 2002 02:00 AM

The West has activated a plan to reduce its dependence on politically risky Gulf oil by encouraging a huge increase in production in West Africa and by tempting Nigeria to leave OPEC. Nigeria, the key nation in the region, faces a clash between its ambition to double oil output and the potential collision with its membership of the producer cartel.
The West African state is already producing well above its agreed quota of 1.7 mm bpd and new discoveries off the Niger Delta could yield more than 1 mm bpd in just a few years. Western oil companies are, meanwhile, getting alarmed at the prospect of billion-dollars investments being mothballed because of Nigeria’s need to comply with OPEC limits.

The potential to increase Nigeria’s oil exports is attracting attention in Washington. US refineries absorb about half of Nigeria’s 1.9 mm bpd and the Bush Administration is anxious to secure alternative sources to Gulf Arab states which are seen as increasingly unfriendly to US interests.
Walter Kansteiner, US Under Secretary of State for African Affairs, met President Obasanjo of Nigeria to discuss oil and security issues. The meeting drew an immediate denial from Jerry Gana, the Information Minister, who said Nigeria had no intention of leaving OPEC. “The United States is trying to put pressure on us. They are luring us to pull out of OPEC. But we know how our interests would be best served and so we are not going to leave OPEC,” he said.

Publicly, the US Government denies that it is applying pressure but Nigeria’s dilemma is obvious. “Nigeria has put a lot of money into developing the offshore, and production quotas need to be adjusted,” an executive of a leading Western multinational said.
Mr Kansteiner has made the US objective very clear: “African oil is of national strategic interest to us, and it will increase and become more important as we go forward.” It is difficult to see how OPEC can accommodate Nigeria’s ambition to double production.

The Brent price drifted lower to $ 25, suggesting that OPEC’s basket of crudes is now priced near the bottom of its $ 22-$ 28 target range. Nigeria’s disaffection with OPEC is helping to soften the price and the West African state is not the only dissenting voice. Algeria, another OPEC member, can produce about 1 mm bpd but is limited to less than 700,000 bpd.
Rampant overproduction is also making a mockery of the quota system and the pressure is on Saudi Arabia to agree to a redivision of the spoils. But the world’s biggest oil producer, with output of 7 mm bpd and capacity to produce 10 mm, is in no mood for charity, after watching helplessly as Russia’s newly privatised oil industry grabbed export markets as Saudi Arabia cut back production.

For the US, the producers of Africa’s Gulf of Guinea offer a more attractive source of energy than Russia. Nigeria is close to US refineries on the East Coast and the Gulf of Mexico.

Source: Times Newspapers Ltd.
Market Research
Upcoming Conferences