FEATURE: Sliding oil production costs Africa influence at OPEC

As recently as 2020, OPEC's five sub-Saharan African members were in a strong position.

Then-secretary general Mohammed Barkindo, a veteran Nigerian oil official, was cheerleading for African energy. Gabon had recently re-joined after a 20-year absence, as had Equatorial Guinea and the Republic of Congo. Perhaps most importantly, African members were maxing out their output quotas – and undertaking voluntary cuts under OPEC's supply pact with Russia and other key producers.

"The historic OPEC+ cuts in April 2020 increased several African members' influence within the group's policymaking, as their voluntary cuts both contributed to market rebalancing and provided a more prominent role in production decisions," said Paul Sheldon, S&P Global Commodity Insights' chief geopolitical adviser.

Times have changed. This year only tiny Gabon hit its OPEC production quota, with the continent's crude producers facing underinvestment, instability, climate activism and technical problems at ageing wells. In North Africa, Algeria has hit its production targets, but Libya's civil war meant it was exempt. In 2022, Barkindo died suddenly, shortly before his tenure was due to end, and was succeeded by Kuwait's Haitham al-Ghais.

Ahead of the next OPEC policy meeting in Vienna on June 3-4, African influence is sinking to its lowest level in years.

While all OPEC members have equal voting power, Saudi Arabia is first among equals, producing around a third of the cohort's crude. For African countries, membership is a chance to boost their diplomatic clout and push for higher oil prices. In the past, cash-strapped African producers have regularly exceeded their quotas, fueling debates about non-compliance.

Falling production

In recent years, however, the continent's producers – particularly heavyweights Nigeria and Angola – have seen crude output collapse, causing them to miss their OPEC quotas.

According to the Platts OPEC survey by S&P Global, Gabon has produced 190,000 b/d on average in 2023, slightly above its 180,000 b/d quota, but the remaining four sub-Saharan members are way off. Angola pumped 1.9 million b/d in 2010 but has struggled to exceed 1.1 million b/d in recent months, well below its 1.46 million b/d target. Small recent discoveries have only served to stabilize production.

Nigeria – Africa's largest producer – has seen production slide due to rampant oil theft, sabotage and technical problems at key fields. The West African country is capable of pumping 2.2 million b/d but average output of 1.3 million b/d in 2022 is well below its OPEC target. Bonny Light, Nigeria's flagship crude, was assessed in May by Platts, part of S&P Global, at a 75 cent discount to Dated Brent, the largest since September 2021.

Tiny Equatorial Guinea is producing less than half of its OPEC quota.

"Capacity declines in Nigeria and Angola in particular, combined with multiple quota increases through 2022, dragged production levels well below official OPEC+ pledges," said Sheldon. "Even following large production cuts in October 2022 and April 2023, Algeria is the only African country voluntarily keeping any supply off the market."

Africa produced 8.1% of the world's crude in 2021, according to the BP Statistical Review of World Energy, and has major untapped reserves and production potential in the coming decades with local energy demand predicted to soar. However, in certain countries insecurity, a challenging investment climate and climate action have deterred investors.

"The underinvestment in oil and gas has truly hurt African states and their ability to produce," said NJ Ayuk, chairman of the African Energy Chamber, noting that the bulk of Africa's new crude is set to come from non-OPEC producers like Senegal, Uganda and Namibia.

"We get the respect, we get the vote [at OPEC], but the guy who takes the biggest hit has some sway," Ayuk added in reference to Saudi Arabia. "If we increase our production, if we are able to turn some of the marginal plays to be producing more, and create an enabling environment, then we stand in an amazing position to really be able to hold more sway."

Russia-Saudi axis

The formation of OPEC+ to stabilize oil markets during the pandemic further crowded out African members, experts say, by establishing a Saudi-Russia axis of power.

"Near-term OPEC+ production decisions will be largely determined by core OPEC+ countries Saudi Arabia, UAE, Kuwait, and Russia, which currently hold 97% of the world's 2.9 million b/d of spare capacity," said Sheldon.

Meanwhile, Barkindo's loss has been felt by African producers. "He believed in the continent...and he was a diplomat par excellence," said Ayuk. "He really sweated to make sure that Africa's voice was not just heard but was at the table. That voice has been truly missed and we don't really have that strong representation coming from Africa." He oversaw the additions of Gabon in 2016, Equatorial Guinea in 2017 and Congo-Brazzaville in 2018.

Price alignment

However, Ayuk said Ghais has engaged with African members since taking office, frequently visiting the continent. Meanwhile, African producers are more united with the Saudis on seeking high oil prices today, given Mohamed Bin Salman's costly reform agenda in the country.

"It would be a big mistake to say that with Barkindo leaving the room Africa lost its voice at OPEC," said Ayuk. "Africa and OPEC get along really well. It's like peanut butter and jelly."