Puzzles of Nigeria’s OPEC membership
BARELY 55 years ago, five oil-producing developing countries including Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, gathered in the Iraqi capital Baghdad to form the Organization of the Petroleum Exporting Countries (OPEC).
That meeting was a momentous as it was held at a time when the oil market was dominated by the established industrialized powers and the odds were stacked against the oil producing countries themselves. The premise of the founding members was to entrench the fact that developing countries have sovereign rights. Their natural resources are more than just a convenience for others.
“Indeed the formation of OPEC was a brave act at the time and its role till today continues to demonstrate that braveness,” this was the conclusion of the Minister of Petroleum Resources and the OPEC President, Diezani Alison Madueke at its 50th anniversary in 2010.
Nigeria joined the 12-member cartel in 1971 to take active position in decisions on global energy demand and supply issues alongside Algeria, Angola, Ecuador, the Islamic Republic of Iran, Iraq, Kuwait, Qatar, Saudi Arabia, the Socialist People’s Libyan Arab Jamahiriya, the United Arab Emirates, and Venezuela.
“As a nation, we have contributed immensely to the objectives of the organization and have benefited accordingly,” Alison Madueke confessed five years ago.
But today, the story seems to be taken a different dimension, as the stakeholders suggest Nigeria’s exit from the cartel after 44 years of participation. This request was sequel to the inability of OPEC to protect its members from the crude oil price volatility.
Indeed, the concerned stakeholders comprises of top shots in the industry, officials of the Nigerian National Petroleum Corporation (NNPC) and some past petroleum ministers who gathered in Lagos at the weekend, requested that Nigeria should quit OPEC without any fears, adding that the nation is capable of surviving outside OPEC.
The stakeholders gathered to celebrate the 80th birthday of First and two time former Group Managing Director (GMD), NNPC Chief Festus Marinho, with a topic: “Nigeria’s energy evolution-A glimpse at the future”. However, concentration was later shifted to the perceived ‘irrelevant’ OPEC membership and the role of NNPC in national building.
Chief Marinho was the first Nigerian Governor of OPEC between 1977 and 1979, when the nation’s oil business was just gathering momentum.
The stakeholders, who showered unquantifiable encomium on the “Maverick pioneer” (Marinho), further expressed fears that the cartel has been dominated by some larger oil producing countries that have formed a caucus within OPEC, even when a Nigerian is the President.
Nigeria’s minister of petroleum, Mrs Diezani Alison-Madueke is the OPEC president, and she is expected to drive the affairs of the group for the next one year.
The cartel actually surprised the world at its last 166th Meeting in Vienna Austria, when it decided to maintain its output quota amid serious calls for review of the demand and supply mechanism.
The former Minister of State (Petroleum) and former Minister of Foreign Affairs, Odein Ajumogobia, wondered why OPEC has failed to take action to curtail the dwindling prices. He noted that the cartel had rescued the situation in the 1970s, 1998, 2008 but failed to take any action in the 2014-2015 price saga.
“It is instructive that OPEC did not intervene in November 2014, as it had done in 2008, in 1998 and on numerous occasions, to stem the price slide, by balancing the supply equation, even in the face of evident oversupply stemming from some 5 million additional barrels of United States (U.S) shale oil. Yesterday the OPEC basket was at $45 per barrel. Some experts predict that the price could go to as low as $30 or even $20 per barrel last seen in 1999.”
Ajumogobia, who had earlier led Nigerian delegation to OPEC, continued: “At the heart of the matter seems to be the desire of individual countries in OPEC, principally Saudi-Arabia and the Arab states within OPEC- excluding Libya, (Iran, Iraq, Qatar and UAE, to protect and maintain their market share through the organisation, as they have been doing, and individually selling their oil at discounted prices.
“ Unfortunately, Nigeria, with zero excess capacity, is mere onlooker at the mercy of the two biggest producers in the world (U.S and Saudi Arabia)…”
“This conclusion however makes me seriously question the benefit of our continuing membership of the organisation in the absence of any protection or leverage whatsoever within the organisation”, He stated.
The Chairman, Transmission Company of Nigeria (TCN), and Director, First Bank of Nigeria Plc, Ibrahim Waziri, said: “Our continuous membership of OPEC is irrelevant. It is more of national sentiments than actually serving the course of Nigeria. What are we getting from OPEC that we cannot get outside OPEC? The cartel is controled by Saudi Arabia. It is completely distructive for us. The time has passed when these things make sense, let us have new thinking, let us think out of world, let us not be afraid to experiment.
The time for redundancy has passed, so, we should change what we are doing and move forward.”
The former Group Managing Director, NNPC, Funsho Kupolokun amid other six past GMD however raised hope about the industry and the performance of the NNPC.
Kopolokun said, “I feel totally unable to agree with that. If everybody pulls out of OPEC who told you that Saudi Arabia cannot pull out of OPEC, and if that happens, price will go back to $9 a barrel where we were in 20 years ago. Somebody has to do pumping up prices.”
Oyibo expressed fears that the oil prices may not bounce back soon, and therefore enjoined the government to exploit other mechanisms that would make the nation to be self-sufficient.
Obaseki lamented the delay in passage of the Petroleum Industry Bill (PIB) and urged the legislators to harmonise opinions and come together to build a truly industry bill.