Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, recently introduced a significant reform within OPEC, which he presented as a rewarding measure for countries investing in their oil industries.

This reform paves the way for granting larger production quotas to OPEC Gulf members like Saudi Arabia, the United Arab Emirates, and Kuwait, while reducing the quotas allocated to African nations such as Nigeria and Angola.

For decades, the allocation of production quotas and baselines, which determine production cuts, has been a sensitive topic within OPEC. Most producers aspire to higher quotas to maximize earnings from oil exports.

In the coming years, this shake-up is expected to become more pronounced as Middle Eastern state oil giants increase their investments, while African nations struggle to attract foreign capital, leading to a decline in their production.

Gulf producers, who possess limited spare capacity in the global oil market, have long held dominance within OPEC. Over the past 15 years, their power and influence have grown significantly due to expanding capacity, while African production has diminished due to shrinking foreign investments.

Unlike their Gulf counterparts, African producers heavily rely on international oil company investments. In recent years, however, these companies have favored investments in the U.S. shale sector and prolific oilfields elsewhere, such as offshore Brazil and Guyana, neglecting Africa.

According to OPEC production figures, in May, Saudi Arabia, the UAE, and Kuwait collectively accounted for over 10% more of total OPEC production compared to 15 years ago, reaching 55%. In contrast, Nigeria and Angola’s combined share during the same period has decreased by over 3% to below 9%.

Analysts at consultancy Wood Mackenzie explained that Nigeria’s capacity continues to be hindered by operational and security challenges, coupled with insufficient investment, resulting in a decline. They added that despite recent discoveries and new field developments in Angola, they will not be sufficient to counter long-term capacity declines.

Conversely, Saudi Arabia and the UAE have devised plans to significantly enhance their production capacities to 13 million bpd and 5 million bpd, respectively, by 2027, surpassing their current levels of approximately 12 million bpd and 4 million bpd. Kuwait, another Gulf producer, announced on June 18 its intention to raise production capacity by 200,000 bpd by 2025, reaching 3 million bpd.

Calculations by Reuters reveal that the combined capacity additions from the three Gulf countries during the 2020-2025 period amount to 1.2 million bpd, which is double the projected capacity loss of Nigeria and Angola over the same timeframe.

Nigeria and Angola, both West African nations, have experienced a decline in their production capacity by nearly 25% since 2019 due to underinvestment and security concerns.

Revamping Production Quotas

During its June 4 meeting, OPEC and its allies, led by Russia (OPEC+), introduced a comprehensive overhaul of production quotas for the majority of its members.

Prince Abdulaziz emphasized that this agreement would recognize the investments made by member countries in the years to come, particularly from 2024 and 2025 onwards.

An anonymous OPEC+ source revealed to Reuters that the overhaul was necessary to establish a fairer system that accurately reflects member countries’ production capacities.

While most OPEC+ members saw a reduction in their production targets, the UAE’s target was increased.

Richard Bronze, Head of Geopolitics at Energy Aspects, explained that one of the motives behind this change was to address OPEC’s previous credibility issues. Previously, policy changes did not always translate into tangible shifts in oil markets, resulting in doubts regarding the group’s ability to manage market fundamentals.

In summary, OPEC’s recent implementation of groundbreaking reforms has resulted in larger production quotas for Gulf states, while African nations face reductions. This shift aims to better align quotas with member countries’ actual production capacities, ensuring a fairer distribution of resources and addressing previous credibility concerns.


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