The recent reforms at OPEC, outlined by Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman, aim to reward countries that invest in their oil industry. These reforms involve giving larger production quotas to OPEC Gulf members such as Saudi Arabia, the United Arab Emirates, and Kuwait, while reducing the quotas for African nations like Nigeria and Angola. Production quotas and baselines, which determine production cuts, have been a sensitive issue within OPEC for a long time, as countries generally want higher quotas to earn more from oil exports.
Gulf producers, particularly Saudi Arabia, the UAE, and Kuwait, have dominated OPEC due to their rising capacity, while African production has declined due to a lack of foreign investment. African producers heavily rely on investment from international oil companies, which have prioritized investments in other regions such as the U.S. shale patch, offshore Brazil, and Guyana.
In contrast, Gulf producers have plans to significantly increase their production capacity in the coming years. Saudi Arabia aims to reach 13 million barrels per day (bpd) and the UAE plans to reach 5 million bpd by 2027. Kuwait also intends to increase its production capacity to 3 million bpd by 2025. These capacity additions from the Gulf countries exceed the projected capacity losses of Nigeria and Angola over the same period.
Nigeria and Angola have faced challenges such as operational and security issues, low investment levels, and declining capacity. Despite recent field developments and discoveries in Angola, analysts believe they will not be sufficient to reverse the long-term capacity declines.
The quota overhaul implemented by OPEC+ aims to create a fairer system that reflects member countries’ production capacity. The reform addresses credibility issues that OPEC faced in the past when policy changes did not necessarily translate into significant supply increases or decreases in the market.
Overall, the reforms at OPEC reflect the changing dynamics of the global oil market, with Gulf producers increasing their capacity while African nations face challenges in attracting investment and maintaining production levels.