11 Jul 2023 | 09:44 UTC

INTERVIEW: Republic of Congo joins race to boost oil output ahead of Nov OPEC+ baseline revision

Highlights

Seeks more dialogue with oil producers beyond OPEC+

Current oil price suits Congo-Brazzaville's sector

Gas to underpin country's hydrocarbons output growth

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The Republic of Congo expects to increase its crude oil output significantly within a year and double gas production in two to three, Minister of Hydrocarbons Bruno Jean-Richard Itoua told S&P Global Commodity Insights ahead of vital negotiations over OPEC production baselines in November that could see the country's 2024 quota rise.

The minister's comments July 6 came as sub-Saharan African OPEC members race to demonstrate bigger output volumes to avoid major cuts to their production baselines. The reductions were agreed following hours of tense negotiations at the last OPEC+ ministerial meeting June 4, with Congo-Brazzaville, Nigeria, Angola and Equatorial Guinea failing to hit their quotas in recent years.

The group has been given until November 2023 to demonstrate that they can increase output.

Speaking on the sidelines of the OPEC International Seminar in Vienna, Itoua said that Congo-Brazzaville's production was currently just below 300,000 boe/d but would rise to 400,000 boe/d by next year, most of it from oil. "We have very high expectation of increased production in one year," he said.

The African country's production quota currently stands at 310,000 b/d but output was 290,000 b/d in May, according to the Platts OPEC+ production survey by S&P Global.

According to forecasts from S&P Global, Congo-Brazzaville's total oil and gas production was expected to rise to 114.2 million boe in 2030, from 108.6 million boe in 2023, driven by a slate of new projects.

Price dynamics

OPEC+ members have been cutting actual production and quotas in a bid to shore up prices, which have seen a muted response to recent events that threaten supply volumes. Shortly before the seminar began July 5, Saudi Arabia extended its additional 1 million b/d cut into August, and Russia announced it would cut crude exports by 500,000 b/d.

However, Itoua said current oil prices were at a good level for the Republic of Congo.

"We need to have the right balance. And really, today around $70/b is a good price. That was the basis for our budget -- $70-$75/b," he said.

Platts, part of S&P Global, assessed Dated Brent at $78.79/b on July 10.

Itoua said that global prices need to be at a level to support three key market needs -- attracting investment, supporting producers' budget demands and social needs, and financing the energy transition. "We don't want it to be too high, because if it is too high it will reduce consumption," he said.

OPEC+ policy

Amid calls by ministers in Vienna for OPEC to increase market share and a recruitment drive by Secretary General Haitham al-Ghais, Itoua said that he supports increasing dialogue beyond current OPEC+ members.

"Our call is for other producing countries not to come inside OPEC, OPEC+, but just to talk with us and then we'll see what is the best thing for the market, for oil, for gas, for all of us. OPEC+ is a good starting point. I hope we'll have more dialogue with other countries," he said.

OPEC+ is targeting greater cooperation with producers outside the group, and potentially adding new members to the coalition. Ghais said July 5 that he supports expansion, which would increase its influence on the market.

Itoua said that African countries could play a key role in attempts to end the Russia-Ukraine war, a year after Russia's invasion of Ukraine caused huge market volatility. An African delegation recently visited Russia and Ukraine on a peace mission.

In the longer term, the minister warned that underinvestment in the oil and gas sector by international banks would be a big mistake, particularly in Africa where hundreds of millions lack electricity access, and where Western governments turned for new supply after moving to reduce oil and gas imports from Russia following the invasion.

"How can you produce more if you don't invest?" Itoua said.

Gas plans

As Congo-Brazzaville looks to boost future production, Itoua said gas projects hold the most promise. "I hope we will be able to double [gas] production in the next two-three years," he said.

One such project is the Marine XII gas project, which Congo-Brazzaville hopes will launch in December. This additional production would supply the domestic market, which relies on gas for 70% of its electricity, and further volumes as LPG for cooking.

Gas from Marine XII will also underpin the country's major LNG production and export plans. It expects to launch LNG shipments in October and increase exports from 600,000 mt/year to 3 million mt of LNG in 2025 when a second 2.4 million mt/year floating LNG plant is commissioned.

Congo-Brazzaville was aiming to become one of the top five exporters of LNG in the world.

Itoua added that the country expects a big new gas discovery to be announced within a year. Currently it was pushing ahead with new gas industry legislation, including a gas code and masterplan.

"We're working very strongly on that. We have the support of the World Bank. The target which is agreed with the World Bank is the end of the year, but I think we will achieve it before that," Itoua said.

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