Oil
OPEC Rift Emerging Over Iraq Output, Possible Return of Iran
LONDON – A fresh rift is emerging among OPEC members over trimming the cartel’s oil output in the coming months, amid surging U.S. production, a resurgence in Iraqi exports and the possible return of more Iranian crude to world markets.
The Organization of the Petroleum Exporting Countries, a grouping of some of the world’s largest oil producers, hasn’t changed its production ceiling for two years. No one expects OPEC to cut back at a meeting scheduled in Vienna for next week.
But some members are pushing to trim output next year, according to people familiar with the debate. One OPEC official said members will have to decide whether or not to cut as early as the first half of next year, amid a risk that short-term global oil supply might build to such a level that prices could weaken.
OPEC holds out-sized sway in global oil markets, producing more than one out of every three barrels burned in the world. But its ability to move prices significantly has been hindered recently by a surge in non-OPEC crude, including a boom in shale oil in the U.S.
And now, Iraq is making strides in dramatically boosting its output after it was hobbled by Saddam Hussein-era sanctions and then the fallout of the U.S.-led invasion of the country. Iraq is on track to produce some three million barrels a day on average this year, its highest sustained level in at least 20 years.
And Iran’s nuclear deal with the West has added new uncertainty over whether the country will eventually be allowed to ramp up its own output, potentially adding more barrels to global markets.
Meanwhile, OPEC expects overall demand for its crude to drop by about 300,000 barrels a day next year.All that is putting pressure on OPEC members to shave their overall production to bolster prices. Iran is pushing publicly for Baghdad to throttle back, and accusing Iraq of stealing its customers amid sanctions.
“Iraq has behaved inappropriately in dealing with customers of Iranian oil” amid the sanctions against Iran, said Mansour Moazami, an Iranian deputy minister in an interview with the ministry’s website earlier this month.
A senior Gulf OPEC official said he expects Iran will seek a debate on whether some OPEC members should rein in production if Iranian barrels start to return to world markets.
“If Iran increases its production, OPEC may have to look at who should cut, and most likely that would be the Gulf,” said one OPEC official. Gulf OPEC officials, however, are split on who should rein in output, according to people familiar with the debate. They include Saudi Arabia, Kuwait and the United Arab Emirates, who together account for the lion’s share of output in the group.
Some say they should do it themselves next year in an effort to bolster prices, while others say Iraq should be asked to rein in its output, those involved in the debate say.
“The closer Iraq gets to a four million barrels [a day] mark, the more it is important for us to find a way to put a limit on their output,” said one Gulf delegate.
But Iraq has shown little willingness to back down. “I don’t think we can take orders from anybody [related to] the future of Iraq—especially Saudi Arabia and Iran,” said Adnan Al Janabi, chairman of the Iraqi parliament’s oil and gas committee, at an energy conference in Istanbul earlier this month.OPEC has kept its overall production ceiling at 30 million barrels a day of crude since December 2011. The organization has long been riven by factions and squabbling. Earlier this year, surging U.S. production divided cartel members over what to do in response to all the new supply. They agreed only to study the issue at the group’s last meeting in May.
Earlier this month, Iran agreed to a number of measures that further restricts its nuclear energy program in exchange for limited sanction relief. Recent U.S. and European Union sanctions have cut Iranian exports by some 1.5 million barrels a day.
The nuclear deal doesn’t technically allow for any new Iranian oil exports. But it promises to temporarily halt any new restrictions over the next six months. As Iran is currently producing a bit below its sanctions limit, the deal could result in the addition of a few hundred thousand barrels of extra Iranian oil per day to markets.
Global crude prices fell initially on the news of the deal, but have firmed again more recently, with prices for Brent, a key international benchmark, hovering just over $110 a barrel. U.S. benchmark prices are around $90 a barrel, still high by historical standards.
Still, if diplomatic progress on Iran continues in the coming months, traders may expect a further easing of sanctions and bid prices down in anticipation of such an outcome. According to Bank of AmericaMerrill Lynch, a full return of lost Iranian exports could slash prices by $10 a barrel—potentially bringing them below the $100 a barrel many OPEC members—including Iran—need to balance their budgets.
– WALL STREET JOURNAL
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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