A Pragmatic Policy On OPEC Quotas

Nigeria has always followed an independent course with respect to OPEC, the Saudi-dominated oil cartel that sets quotas for each oil-producing nation's output and has a major role in gasoline prices.

OPEC is a highly political animal and some would say very responsive to outrage from Western consumers - and their representative politicians - about the high cost of filling up their SUVs these days.

It is also mindful of the major presence of the United States in Iraq right now, which has saved the Saudis what muight have been one day a battle of their own against Saddam Hussein; the Saudis recognize that U.S. forbearance on Iran is limited by its ties to Israel and perhaps is only constrained at all by its long and friendly relationship with the Saudis, who might not want the Iranian regime to survive but are reluctant to deal with the political blowback from their own people should America choose to relieve the Iranian mullahs of their capacity to make nuclear weapons.

None of that is of concern to Nigeria; it has its religious rifts under benevolent control, and has nothing to do with America's Middle Eastern wars. It doesn't believe in sacrificing its own revenues for a greater good that foreign diplomats may perceive.

The country, then, has never been anxious to give up its opportunity to produce oil that brings the lion's share of its national revenues, and it has often spoken out against heavy-handed direction from OPEC. Now, though, it wants to limit supply to keep the higher revenues from limited supplies flowing into its coffers. It is certainly a pragmatic policy.

While now producing some 2.4 million bbls of oil daily and aiming to soon hit 3 million, it is once again rejecting OPEC's direction on higher quotas, mainly because it doesn't want to see the price of oil fall any further than it has in the past week, from a high around $58 to $50.52 on Monday.

The consequences of Nigeria's independence are positive for the firms that will produce millions of barrels a year from the Gulf Of Guinea, which is expected to yield about 10 percent of the world's supply not many years from now. It would be problematic indeed to make a huge discovery there if the oil could not be produced, and Nigeria is usually - although not just now - on the side of heavy producers.

The irony is that American consumers may suffer if ERHC Energy (OTC BB symbol: ERHE) realizes the full potential of its Gulf of Guinea rights, and that will be assisted by Nigeria's penchant for energy income and its bold independence from OPEC.

Here is a story from today's Daily Independent once again trumpeting Nigeria's independent approach:

Nigeria rejects higher OPEC quota
by Chuks Isiwu
Online Editor

LAGOS -- Nigeria is asking the Organisation of Petroleum Exporting Countries (OPEC), of which she is a member, not to raise crude oil production now that prices of the product have eased below $55. Nigeria is the second member of the organisation, after Algeria, to oppose moves by the Middle East members of the body to increase output.

Nigeria’s position is also in sharp contrast to those of OPEC's President, Sheikh Ahmad al-Fahd al-Sabah, who said on Monday that OPEC was pressing on with a second output increase in May to build up stockpiles ahead of strong demand expected in the second half of the year.

Speaking on Tuesday in Singapore, Presidential Adviser on Petroleum and Energy, Dr. Edmund Daukoru, said: "I don't go along with that. I think that at the current price level, there is no need to activate the second tranche."

OPEC boosted output by 500,000 barrels per day (bpd) at its March 16 meeting and left room for a second increase if prices failed to drop below $55 a barrel. Benchmark U.S. light crude futures spiked to an all-time high of $58.28 a barrel last week, but had fallen to $53.81 on Tuesday, up 10 cents on the day.

Daukoru said OPEC should only consider another production increase if oil prices were to climb back above $55 for a period of 10 to 14 days as he emphasised that raising output now would risk prices sliding lower during the second quarter, the weakest for demand, he said.

"If we are not careful, our concern will be for oil prices to move in the opposite direction," he told reporters on the sidelines of a presentation for Nigeria's new round of offshore exploration licensing.

Algerian Energy Minister, Chakib Khelil said at the weekend that he saw no reason for OPEC to raise supplies.

Sheikh Ahmad, who is also Kuwait oil minister, said real output by the cartel was set to hit 28.5 million bpd in May, up from just over 28 million bpd this month, the bulk of which would likely come from Saudi Arabia.

The kingdom, which holds most of OPEC's spare output capacity, is moving on with plans to lift supplies despite dissent within the cartel, telling refiners in Asia it would sell them about 10 per cent more crude in May than in April, market sources said on Tuesday.