Martha Dowding

Martha Dowding is a Research Associate at Onyx Capital Advisory. Prior to joining Onyx Martha completed her studies at Newcastle University where she studied Chemical Engineering and gained experience in writing comprehensive research reports.

Resource curse to cartel curse…?

2 min read
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It is easy to see OPEC as a uniform entity or to easily use it synonymously with Saudi Arabia, however, the recent pushback from its African members shows both the importance of the geopolitical tensions within the group and the strength a country can gain from the parameters asserted on her from the strong-arms within the group.

A game changer within the African OPEC contingency is the Dangote refinery. This month the Dangote refinery ramped up to full power as 6 million barrels of crude are being processed in December to test it. Aliko Dangote, the ‘richest man in Africa’ after whom the plant is named declared that production has started at 350kbpd and will have upgraded to 650kbpd by the end of December. This is a huge development and a huge step in the gradual and vital lessening of the resource curse for Nigeria. Although Nigeria has had proven oil reserves since 2011, the lack of refining activity and moreover, the lack of funding for internal refining projects has proved a monumental issue. 

Not only will the long-awaited refinery start allow for greater domestic revenue but it also somewhat transform the intra-OPEC relationship between the Middle Eastern goliaths and the African states whose GDP is so reliant on oil revenue, but perhaps lack infrastructure outside of the oil projects in order to bear the sacrifice in market share for greater supposed stability, control and (cynics may say) for higher prices.

Nigeria, alongside Angola, expressed their intentions to secure a larger oil production quota which has been pointed to as the reason behind the delays in the OPEC meeting this month. Nigeria produces about 1.4 million barrels of oil a day, her previous OPEC allowance was 1.74mbpd. If this refinery is diverting crude oil from the market then OPEC may decide it is not necessary to provide Nigeria with such a high quota, as it has been missed for so long. This is the issue that the NNPC has been circling as the refinery begins to process. If OPEC deem that the refinery will detract from the unprocessed crude oil throughput of the country then they may therefore slash Nigeria’s quota they are ‘allowed’ to export.

The modern cartel curse of abiding by OPEC may be no longer weigh on Nigeria as slashing production quotas may allow for more choices to maximise their independent revenue once the Dangote refinery is at full capacity.   

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Martha Dowding is a Research Associate at Onyx Capital Advisory. Prior to joining Onyx Martha completed her studies at Newcastle University where she studied Chemical Engineering and gained experience in writing comprehensive research reports.