New OPEC Quota Excites Oil Companies as crude prices drop

www.thisdayonline.com By Mike Oduniyi

Multinational oil companies yesterday expres-sed excitement over news of the seven percent increase in Nigeria's official Organisation of Petroleum Exporting Countries (OPEC) quota, boasting that they were fully set to meet the new production quota.

Nigeria's quota was increased by 124,000 barrels per day (bpd) to 2.018 million bpd after OPEC at an emergency meeting on Sunday, agreed to raise its production ceiling by 1.5 million barrels per day (bpd) to 24.5 million effective February 1, 2003.

To oil producing companies in Nigeria, the new quota, following an earlier increase of 107,000 bpd effected at the beginning of this year, paved the way to produce from new fields that had been shut in for most part of last year while Nigeria struggled to keep within her former OPEC quota of 1.78 million.

The spokesman for Shell Petroleum Development Company (SPDC), Mr Tom Boham, told THISDAY yesterday that the upward review of Nigeria's output quota would in the interim help solve the production constraint the companies faced.

"It (new quota) is good news for both Nigeria and the companies. We are confident to meet it and even at a short notice," Boham said.

He added that oil companies had been worried about the issue of constraint posed to operating newly discovered fields based on the country's tight production quota.

"If investment had been made on new fields, companies expect a reasonable level of returns," he said adding that Shell was eagerly awaiting the level of production increase that will be shared out to all the companies.

Shell, Nigeria's biggest oil producer started production from its new shallow offshore field EA last December, which is expected to grow into an output of 140,000 bpd. But at the time the field went into production, it was yet to be factored into Nigeria's OPEC quota.

An official of Mobil Producing Nigeria, also described the quota increase as "good news". "We have the capacity to meet increase of even 2.5 million bpd. Right now, major oil companies are producing at a little above 50 percent of their capacity," said the official.

The official added that oil producers hoped OPEC would be just be able to sustain a crude oil price level of between $22 and $28 per barrel.

Meanwhile, oil prices dropped marginally yesterday following the break of the news of the OPEC agreement to lift output.

Light crude fell by 34 cents to $31.20 a barrel while International market reference crude, the British Brent, fell 38 cents to $29.29 per barrel.

Fears that a US. assault on Iraq may be only weeks away, as well as the strike in Venezuela, are helping to support prices that recently hit a two-year high of $33.65 a barrel.

But there are equally worries about how much of the extra oil OPEC can actually deliver.

The 1.5 million bpd increase was divided pro-rata among members, meaning Venezuela was also granted its share of the higher output limit despite the 43-day-old strike that has slashed its exports by 80 percent to 500,000 bpd.

Venezuela, OPEC's third-biggest producer, is fifth in world exporter rankings, while Iraq sells up to two million bpd overseas under the United Nations oil-for-food programme.

OPEC President, Abdullah al-Attiyah, said on Sunday ministers would meet again if Venezuela restores full production. The group's next scheduled gathering is for March 11, 2003.