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Opec-Plus May Discuss Baseline Adjustments

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Opec-plus may discuss adjustments to members' oil production baselines in early December as many of them struggle to meet their agreed quotas, delegates told Energy Intelligence on Friday.

For many months now, Opec-plus members including Russia, Nigeria and Angola have been falling short of their production targets, with the result that the group as a whole has been producing less oil than agreed.

Adjusting baselines could potentially free up more Opec-plus production by aligning individual quotas more closely with members' true capacity to produce.

At its last meeting Opec-plus decided to cut its targeted output by 2 million barrels per day from November, but officials said at the time that further changes could be made if needed. The decision to lower production angered the US.

The shortfall in the group's output reflects various constraints experienced by several members, including problems with infrastructure, insufficient upstream investment and sanctions.

"Talks are going on about the possibility of adjusting baselines," said one Opec-plus delegate. Another delegate confirmed that the issue might be discussed when the group's ministers meet in Vienna on Dec. 4.

Sensitive Issue

Delegates said it is too early to predict what might happen in Vienna in terms of any potential changes to the alliance's production policy or baseline adjustments.

Baselines and quotas are a sensitive issue among members, which are keen to preserve their share of the oil market — even if it is only on paper.

Nigerian National Petroleum Corp. chief Mele Kyari recently told Energy Intelligence that his country was planning to boost its crude oil output to 1.8 million b/d by the end of this year from current levels of around 1.45 million b/d.

However, industry experts are skeptical that the country will be able to achieve this goal. Nigeria has consistently missed its Opec-plus target this year.

Given the potential for discord within the group, a discussion about revising baselines has been put on the backburner for months.

Energy Intelligence previously reported that during the last Opec-plus ministerial meeting, Oman's energy minister was the only person to raise the matter, which ultimately was not discussed.

Nevertheless, a discussion is expected sooner or later, assuming the group wants to address the persistent shortfall in its targeted output.

Energy Intelligence estimates that crude oil output for the 19 Opec-plus members with a quota fell by about 60,000 b/d to 38.6 million b/d in October — 3.5 million b/d short of the group's official target of 42.1 million b/d for that month.

Similarly, the 2 million b/d cut agreed for November is largely notional because it includes reductions in targeted levels for countries such as Russia and Nigeria that were already failing to meet their quotas.

The actual reduction in Opec-plus output in November is expected to be around 1 million b/d.

Saudi Energy Minister Prince Abdulaziz bin Salman said at the COP27 climate conference on Friday that Opec-plus will remain cautious with regard to oil production, according to media reports.

Topics:
Opec/Opec-Plus, Oil Supply
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