Violence, unrest and investment hurdles are making African producers in Opec its weakest supply link, helping prop up oil prices to the benefit of the group’s strongmen led by Saudi Arabia.
Oil supply in Nigeria, Africa’s biggest producer, Algeria and Libya — which pump 15% of Opec’s 30mn barrels per day — has been under-performing for some time and little if any growth is expected in the medium term.
And rising violence since the Arab Spring of 2011 and unappealing commercial terms for foreign investors are making it even more difficult for some African Opec nations to boost production capacity.
“The Arab Spring is a bigger deal than we expected,” said Antoine Halff of the International Energy Agency, while introducing an IEA report earlier in May which lowered output forecasts for African Opec members, according to Reuters.
Shrinking oil output and rising social spending have already pushed Algeria to join the ranks of Iran and Venezuela in Opec as a hawk on oil prices.
Those countries are among those with the highest budget breakeven oil prices in Opec and have the most to fear from the growth of shale oil in the US, where home-grown production means imports are declining.
The 12-member Opec is widely expected to keep its official target unchanged when it meets on Friday, although Algeria could call for Saudi Arabia to lead a supply cut to support prices.
Nigeria and Libya are still likely to fall in line with Saudi Arabia, which favours an oil price of $100 a barrel.
Unable to expand supplies in the good times, the African Opec members will be reluctant to contribute to any cut in Opec output.
Nigeria, Libya and Algeria have been posting falling or stagnant output in the last few years.
According to the IEA’s report launched earlier this month, Nigeria, Angola, Libya and Algeria will collectively post zero growth in production capacity during 2012-2018, when Opec’s overall capacity is forecast to rise by 1.75mn bpd to 36.75mn bpd.
Nigerian crude exports are running at a four-year low below 2mn bpd, suffering from oil theft and increased sectarian violence.
It has also felt the heat from the rise of shale oil in the US, losing ground in its most lucrative export market and diverting sales to Asia. Exports of Nigeria’s crude to the US dropped to zero for a week in March.
Opec does not hold a common position on the benefits or otherwise of US shale.
While Saudi Oil Minister Ali al-Naimi says he welcomes the US shale boom, his Nigerian counterpart Diezani Alison-Madueke has said it will have a “major impact”.
Nigeria should add a small net 85,000bpd of capacity to 2.66mn bpd by 2018, the IEA forecasts.
Although Libya swiftly restored output after the 2011 uprising that ended Muammar Gaddafi’s rule, a new wave of unrest has kept flows at around 1.4mn bpd, less than it pumped before the conflict.
Algerian output has fallen below 1.2mn bpd from a peak of 1.37mn bpd in 2007. Even before the deadly attack at the In Amenas gas plant, oil firms saw Algerian production terms as unattractive at a time of rising global competition.