Last week, the Organisation of the Petroleum Exporting Countries, OPEC, at its 161st Ordinary Meeting of the Conference, in Vienna, Austria, decided to retain its production output at 30 million barrels per day; Nigeria’s Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in this interview with Clara Nwachukwu, argued that the decision was based on consideration of global events. Excerpts:
What was the outcome of the just-concluded meeting?
We covered quite a lot of issues, I think most critical amongst them is the production volumes in response to the supply and demand situation, and a slight glut on the supply side, if you want to call it that. We unanimously decided that we will retain the 30 million barrels per day volume that we set in the last meeting. To do that, all countries are taxed to try and keep within their margins.
In addition to that, we also looked at administrative issues such as the position of the Secretary General of OPEC, and there are four very strong candidates, and it was felt that a body should review them and that will be done in September, so that we will be advised on who is the most qualified when we meet and take it from there. So that before we congregate in December, a new Secretary General would have been unanimously picked for the organization.
What is the implication of this decision on Nigeria?
I think that in the medium term the implication is fairly balanced for the country. Bear in mind that when we give our volume projections, and our volumes in the real sense we usually amalgamate both our condensates with the actual crude, so at this point in time, we are pretty much within our margins in terms of OPEC.
We had in fact, witnessed a slight drop in production over the last few months due to the high rate of pipelines vandalism, and one or two asset integrity issues, but mostly vandalism ,and that has become a key issue at this point in time. But I think that overall, we will be fine in terms of the OPEC quotas.
But bear in mind that these margins have also taken into consideration the non-OPEC production as well, and we are trying to ensure that there isn’t a glut in the market because there isn’t an over preponderance proportion of crude around the globe, as obviously that could lead to a major drop in the price of the barrel.
Considering OPEC’s concern on price volatility, one would have expected the group to go for a change in volumes, but that didn’t happen, why?
I think that we looked at the balance across the globe in terms of crude volumes, both in terms of OPEC and non-OPEC, and in looking at that under the assumption that member countries will stick to their margins, the 30 million barrels per day volume is still very safe. And in the medium term, we still ensure that prices are kept fairly stable.
But part of the issue has always been countries keeping to their quotas?
You cannot actually punitively enforce quota because each member country and every government has the sovereign right to the production of its hydrocarbon resources, but as a body, we expect that member countries, to a large extent stick to them.
Will the game change if the European Union makes good its threats to sanction Iran over nuclear activities?
We are still looking at that; we looked at it as a body and we felt that it was a political move and that as a body, we should not get involved with political issues. But of course, if that does happen, a consideration will be taken of it going forward. And I believe we will call a meeting and take a decision on that.
OPEC also just concluded its 5th International Seminar, what did Nigeria take away from it all?
We took away all the issues that were discussed at the meeting. We now have a better understanding of the volatility of the market, of the global implications of demand disruptions, and the implications of rising oil prices.
We looked at the futures market and how the derivatives in the money market affect the price of the barrel in the market. Oil and the world economy were looked at in all the ramifications, and oil within the entire global picture. I think that this year’s seminar took complete cognizance of the critical importance of oil in the life of the economies across the globe.
We also heard very interesting perspectives, particularly from the emerging economies, and the fact that the importing countries are hit the hardest. Since it was pointed out that oil prices affect the economic growth of developing countries, we can’t afford to leave price stability unregulated, and in the hands of the speculative market.
We heard that high oil prices definitely affect oil consuming countries as much as it does the oil producing countries by reducing the world growth rate by 2.5% of the GDP.
It was said that about 4.5 billion people in the world are affected by energy poverty, or not even having access to it at all. Considering that a lot of these people are also in Nigeria, how are we addressing this?
We are looking at it from a number of perspectives, first, there is clearly an abundance of natural gas resource in our country, 187 trillion cubic feet, as you know discovered and 600 tscf undiscovered potential, so we are first and foremost moving for the stabilization of LPG for domestic gas within the country and to ensure that we put in place the right logistic basis to ensure that over the next three years, LPG becomes a fuel of choice.
This is particularly important because while, energy poverty tends to relate to electricity, we have at this time in Africa, over 70% of the population still using biomass fuels such as fire wood for cooking and for heating. In Nigeria, as you know, most of our population use kerosene, which is not an environmentally friendly fuel of choice, but LPG will both heat and cook food to bring it down to fundamentals and also give you light as well.
So, while we move to ensure that we increase our power sources at a higher level, which means that we are aggressively moving on a 12month gas emergency roll out plan to ensure that we provide enough gas to sustain the NIPPs, and other power plants as a common stream over the next three years, and in turn, ensure that we have the requisite power that they will produce for Nigerians.
We must also look at the fundamentals and ensure that in this period of time that out people who have been dependent on biomass actually move on to a much better environmental fuel In terms of LPG.