OPEC’s decision to extend production cuts is a positive step for African energy players

Sierra Leone Telegraph: 08 June 2020:

Over the weekend, the 11th OPEC and non-OPEC Ministerial Meeting concluded on a series of decisions which will help maintain a still fragile market stability, and which should be supported.

Held via videoconference on Saturday, June 6th, the Ministerial Meeting reconfirmed the existing arrangements under the April agreement and extended the production cuts of 9.7 million barrels per day by another month, until July 30th 2020. The deal was initially due to expire on June 30th.

In addition, all participating countries subscribed to the concept of compensation by those countries who were unable to reach full conformity to the agreement in May and June.

As a result, and in addition to their already agreed production adjustment for May and June, countries who were not able to comply for these two months expressed their willingness to compensate for it in July, August and September.

The reaffirmation of the OPEC+ commitment to the historic deal made last April comes on the back of a steady rise in oil prices. Gradual reopening of world economies along with increased conformity to the production cuts have allowed oil prices to bounce back and reach the $40/bbl threshold. The rise has been especially beneficial for Nigerian and Angolan blends.

“OPEC is taking the right steps to respond to the market and should be commended. Uncertainty is bad for the oil industry and the extension of OPEC’s cuts ensures market stability,” declared NJ Ayuk, Executive Chairman at the African Energy Chamber. “African energy companies and even state companies are facing a battle with liquidity because of the price war and the coronavirus. They do not have state bailouts as their Western counterparts. We hope the production cuts will give the market a boost, however compliance and collaboration from the G20 is key.  OPEC has proven its ability to show leadership in times of crisis. We are all in this together,” added Ayuk.

Earlier this month, the African Energy Chamber had called for an extension of the 9.7 million b/d production adjustment and urged all producing countries to ensure their conformity to the agreement. The rebalancing of the market is key for African oil producing nations to preserve jobs in the sector and give the continent an opportunity to stabilize and recover.

The chamber acknowledges the role of African OPEC players like Nigeria, Algeria, Equatorial Guinea, Gabon, Congo, Angola, and Libya in making this work.

1 Comment

  1. In the September and October 2013 issue of Foreign Affairs monthly magazine, there was an article about Africa’s oil Boom. It listed the usual suspects of African oil producing countries like Nigeria and Angola, Ghana, and few more other future potential oil producing countries like Sierra Leone, Liberia, and others nestled around the gulf of Guinea. It says if these oil Wells come to stream, our countries will be overwhelmed by new found wealth. Here is a quote: “If used wisely, this influx of capital had the potential to fund path breaking improvements in physical infrastructure and human well-being. But if state officials, enabled by the absence of meaningful institutions of transparency and accountability, manage to divert the oil revenues to themselves, then the new wealth will serve only to further consolidate the power and inflate the personal fortunes of the ruling elite”.

    They went on to say by 2017, the countries listed would have seen studies completed, and the ground work for oil exploration started. What they forget to include in that article that is possible with other countries. But for Sierra Leone government commission projects, for some unexplained reason we are always larking behind by fifty to sixty years to our major competitors in the region.

    Even to construct a bridge between Lungi international airport and Freetown is caught up in our never ending red tape debate. We spend twenty years debating the plans, twenty years drawing them up on paper, and finally twenty years for laying the foundation stone, and implementing the rest of the plans. Apart form corruption, that is one of the biggest obstacles to country’s development. Why are our leaders like that? For some reason, or reasons which are hard to fathom, both our past APC government under EKB, and now President Bio don’t seem to take any interest to explore this oil wealth. The only thing politicians seem to be good at, is to conduct show trials, for the benefit of their not so intelligent supporters. For now, the Mende and Fula people and a sprinkle of other tribes are in power, so we put the Krio, Limba and Temne politicians on trial.

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