IEA tips Nigeria, others to drive surge in global oil production

Paris-based International Energy Association says that oil producing countries like Nigeria, Venezuela, Libya, Iraq and Iran has the potential to drive a surge in global oil production but also that higher oil prices will have consequences for the economies of developing countries.

In the organisation’s latest oil market report, IEA global demand and supply are now close to new, historically significant peaks at 100 million barrels per day (mb/d), and neither show signs of ceasing to grow any time soon.

“In future, a lot of potential supply could come to the market from places like Iran, Iraq, Libya, Nigeria and Venezuela, if their various challenges can be overcome.”

It said oil markets look “adequately supplied for now” after a big production increase in the last six months, but the industry is coming under strain

“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the IEA said.

For Nigeria, the bulk of its problems are home grown. An inability to pass a comprehensive petroleum sector law has dampened investment appetite and curtails new production that could have grown the country’s reserves. Local oil companies struggle to raise capital to finance projects and multinationals are increasingly finding terms in other African countries more competitive.

The IEA in its market report highlighted that impact sanctions on Iranian oil exports by the United States will have on the global market but it is unlikely Nigeria will ramp production to reap much benefit, raising production by 26,000 bpd production in September.

Supply from Iran during September dropped to a two-and-a-half year low as customers continued to cut back in the run-up to new sanctions, which start on Nov. 4.

Iranian output fell to 3.45 million bpd, down 180,000 bpd month-on-month. Iranian oil exports in September fell to 1.63 million bpd, down 800,000 bpd from recent 2Q18 peaks, the IEA estimated.

“The decline may deepen significantly ahead of US sanctions — and subsequently as final cargoes are delivered,” said the IEA.

According to OPEC figures, Nigeria’s oil production in between August and September rose by 26,000 bpd while Libya’s production rose by 103,000 bpd. Both countries helped OPEC crude production rise by 132,000 barrels per day in September to 32,761,000 bpd.

The organisation however warns, “Nonetheless, our position is that expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth.

“For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute,” the IEA said.

On the impact of trade wars, it warned that the global economy is at risk from trade disputes.

The IEA cautioned that the outlook for world oil consumption is faltering and cut its forecast of global oil demand growth by 0.11 million bpd for both this year and next to 1.28 million bpd and 1.36 million bpd respectively.

“This is due to a weaker economic outlook, trade concerns, higher oil prices,” it said.

ISAAC ANYAOGU