OIL COMPANIES READY TO CUT NIGERIA'S APRIL

C O N F I D E N T I A L LAGOS 000698

SIPDIS

E.O. 12958: DECL: 03/30/2014
TAGS: EPET EINV PGOV PREL NI
SUBJECT: OIL COMPANIES READY TO CUT NIGERIA'S APRIL
PRODUCTION

REF: LAGOS 499

Classified By: Joseph Gregoire for reasons 1.5 (b)(d) and (e).


1. (C) ExxonMobil, ChevronTexaco and Shell have received
instructions from the Nigerian National Petroleum Corporation
(NNPC) to anticipate reductions in their April production
quotas in response to an anticipated OPEC decision to reduce
production worldwide. Edmund Daukoru, Nigeria's presidential
advisor on oil matters, announced February 24 that Nigeria
would reduce its oil output by 150,000 barrels per day to
comply with an OPEC agreement on production cuts. (reftel).


2. (C) Mary Feeley, ExxonMobil's General Manager for
Exploration, told ECONOFF on March 15 that ExxonMobil
received notice from NNPC that it should expect a reduction
in its April allocation of Nigeria's OPEC quota. Feeley said
she is not certain how NNPC determines each company's
allocation, noting that decisions regarding the quota are
made "in a black box," and the companies are simply told what
they can expect to lift each month. The following day, Kevin
Kassner, a senior advisor on Chevron Nigeria's Executive
Staff, added that the company had also been notified that its
April allocation will be reduced. In a meeting with ECONOFF
and Paul Hueper of the U.S. Department of Commerce on March
22, O.J. Agbarah, Shell's Area Production Manager based in
Warri, said Shell is expecting to reduce itsApril production
in the area from 450,000 barrels per day (bpd) to between
350,000 to 380,000 bpd.


3. (C) ExxonMobil's Feeley and Chevron's Kassner both noted
that such a notice from NNPC is never the final word.
According to them, the companies are always
prepared for "swing production," when NNPC requests more
liftings mid-month that drive output higher than the
pre-stated monthly allocation.


4. (C) COMMENT: The GON seems prepared to comply with a
reduction in crude output if OPEC continues that tack at its
March 31 meeting. In so doing, Nigeria would be trying to
leverage its position that it deserves a quota increase.
Daukora recently stated publicly that he is hopeful Nigeria's
quota will be raised from 8.2 percent to 10 percent of OPEC's
total production. NNPC Group Managing Director Funsho
Kupolokun also said he hopes for a higher quota, noting that
the recent commissioning of Total's Anemnam/Kpono oil field
raises Nigeria's production capacity to 2.8 million bpd,
almost 800,000 bpd over the country's quota. The GON's
cooperative stance may be a hedge: if the OPEC meeting does
not end in an agreement on reduced output or if it appears
other members will not comply with such an agreement, NNPC
may use swing production to maintain the country's current
high output. END COMMENT.
HINSON-JONES