• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 1 day "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 6 days America should go after China but it should be done in a wise way.
  • 1 day World could get rid of Putin and Russia but nobody is bold enough
  • 1 day How Far Have We Really Gotten With Alternative Energy
  • 6 hours Even Shell Agrees with Climate Change!
  • 2 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 12 days Does Toyota Know Something That We Don’t?
  • 4 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in

Breaking News:

OPEC Lifts Production in February

U.S. Drillers Pump The Brakes

U.S. Drillers Pump The Brakes

The total number of active…

Major Oil Companies Make Moves in Megamerger Frenzy

Major Oil Companies Make Moves in Megamerger Frenzy

Several high-profile mergers among oil…

Oil Majors Dive Into Deepwater Projects Despite Tight Budgets

Oil Majors Dive Into Deepwater Projects Despite Tight Budgets

Despite tightened budgets, frontier drilling…

Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

More Info

Premium Content

How Much Oil Can OPEC Realistically Add?

  • Only 5 producers in the OPEC+ alliance are able to significantly boost output in the short term
  • Africa's oil giants Nigeria and Angola are the hardest hit, with the pair having pumped an average of 276kbpd below their quotas for more than a year now
  • U.S. shale cannot be expected to fill the supply gap

Two weeks ago, in a short and terse affair that did nothing to address the spill-over from overheating gas markets, OPEC+ confirmed that it would stick to its July agreement to boost output by 400,000 barrels per day (bpd) each month until at least April 2022 to phase out 5.8 million bpd of existing production cuts.

The group agreed in July to boost output by 400,000 bpd a month until at least April 2022 to phase out 5.8 million bpd of existing production cuts–already much lower compared to the huge curbs that were in place during the worst of the pandemic.

The organization has lately come under pressure to ramp up production at a faster clip from several quarters, including the Biden administration so as to ease supply shortages and rein in spiraling oil prices. OPEC+ is scared of spoiling the oil price party by making any sudden or big moves with last year's oil price collapse still fresh on its mind.

But maybe we have been overestimating how much power the cartel has to jack up production on the fly.

According to a recent report, at the moment, just a handful of OPEC members are capable of meeting higher production quotas compared to their current clips.

Amrita Sen of Energy Aspects has told Reuters that only Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, and Azerbaijan are in a position to boost their production to meet set OPEC quotas, while the other eight members are likely to struggle due to sharp declines in production and years of underinvestment.

Underinvestments stalling recovery

According to the report, Africa's oil giants Nigeria and Angola are the hardest hit, with the pair having pumped an average of 276kbpd below their quotas for more than a year now.

The two nations have a combined OPEC quota of 2.83 million bpd according to Refinitiv data, but Nigeria has failed to meet its quota since July last year and Angola since September 2020.

In Nigeria, five onshore export terminals run by oil majors with an average production clip of 900,000 bpd handled 20% less oil in July than the same time last year despite relaxed quotas. The declines are due to lower production from all the onshore fields that feed the five terminals.

In fact, only French oil major TotalEnergies'(NYSE:TTE) new deep offshore oilfield and export terminal Egina has been able to quickly ramp up production. Turning the taps back on has been proving to be a bigger challenge than earlier thought due to a shortage of workers, huge maintenance backlogs, and tight cash flows.

Indeed, it could take at least two quarters before most companies can work through their maintenance backlogs which covers everything from servicing wells to replacing valves, pumps, and pipeline sections. Many companies have also fallen behind on plans to do supplementary drilling to keep production stable. 

Angola has not been faring any better.

In June, Angola's oil minister, Diamantino Azevedo, lowered its targeted oil output for 2021 to 1.19 million bpd, citing production declines at mature fields, drilling delays due to COVID-19 and "technical and financial challenges" in deepwater oil exploration. That's nearly 11% below its 1.33 million bpd OPEC quota and a far cry from its record peak above 1.8 million bpd in 2008.

The southern African nation has struggled for years as its oil fields steadily declined while exploration and drilling budgets failed to keep up. Angola's largest fields began production about two decades ago, and many are now past their peaks. Two years ago, the country adopted a string of reforms aimed at boosting exploration, including allowing companies to produce from marginal fields adjacent to those they already operate. Unfortunately, the pandemic has stunted the impact of those reforms, and not a single drilling rig was operational in the country by May, the first time this has happened in 40 years.

So far, just three offshore rigs have resumed work.

Shale decline

But it's not just OPEC producers that are struggling to boost oil production.

In an excellent op/ed, vice chairman of IHS Markit Dan Yergin observes that it's almost inevitable that shale output will go in reverse and decline thanks to drastic cutbacks in investment and only later recover at a slow pace. Shale oil wells decline at an exceptionally fast clip and therefore require constant drilling to replenish lost supply. 

Indeed, Norway-based energy consultancy Rystad Energy recently warned that Big Oil could see its proven reserves run out in less than 15 years, thanks to produced volumes not being fully replaced with new discoveries.

According to Rystad, proven oil and gas reserves by the so-called Big Oil companies, namely ExxonMobil, BP Plc. (NYSE:BP), Shell (NYSE:RDS.A), Chevron (NYSE:CVX), Total (NYSE:TOT), and Eni S.p.A (NYSE:E) are all falling, as produced volumes are not being fully replaced with new discoveries.

Granted, this is more of a long-term problem whose effects might not be felt soon. However, with the rising sentiment against oil and gas investments, it's going to be hard to change this trend.

Experts are warning that the fossil fuel sector could remain depressed thanks to a big nemesis: the trillion-dollar ESG megatrend. There's growing evidence that companies with low ESG scores are paying the price and increasingly being shunned by the investing community.


According to Morningstar research, ESG investments hit a record $1.65 trillion in 2020, with the world's largest fund manager, BlackRock Inc. (NYSE:BLK), with  $9 trillion in assets under management (AUM), throwing its weight behind ESG and oil and gas divestitures.

Michael Shaoul, Chairman and Chief Executive Officer of Marketfield Asset Management, has told Bloomberg TV that ESG is largely responsible for lagging oil and gas investments:

"Energy equities are nowhere close to where they were in 2014 when crude oil prices were at current levels. There are a couple very good reasons for that. One is it's been a terrible place to be for a decade. And the other reason is the ESG pressures that a lot of institutional managers are on lead them to want to underplay investment in a lot of these areas."

In fact, U.S. shale companies are now facing a real dilemma after disavowing new drilling and prioritizing dividends and debt paydowns, yet their inventory of productive wells continues falling off a cliff.

According to the U.S. Energy Information Administration, the United States had 5,957 drilled but uncompleted wells (DUCs) in July 2021, the lowest for any month since November 2017 from nearly 8,900 at its 2019 peak. At this rate, shale producers will have to sharply ramp up the drilling of new wells just to maintain the current production clip.

If we need any more proof that shale drillers are sticking to their newfound psychology of discipline, there is recent data from the EIA. That data shows a sharp decline in DUCs in most major U.S. onshore oil-producing regions. This, in turn, points to more well completions but less new well drilling activity. It's true that higher completion rates have been leading to an uptick in oil production, particularly in the Permian; however, those completions have sharply lowered DUC inventories, which could limit oil production growth in the United States in the coming months.

That also means that spending will have to increase if we are to see shale keep pace with production declines. More will have to come online, and that means more money.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mamdouh Salameh on October 17 2021 said:
    In theory, OPEC+ could return the remaining production cuts amounting to 5.8 million barrels a day (mbd) to the market after April 2022. But in reality it will be extremely difficult particularly with Nigeria and Angola already producing 276,000 barrels a day (b/d) less than their combined OPEC quota of 2.83 mbd.

    Therefore, a realistic additional oil production from OPEC+ wouldn’t exceed 5.60 mbd in 2022.

    As for US shale oil production, it will be hard pressed to add more than 300,000-400,000 b/d to its current production of 11.0 mbd in 2022.

    International oil companies (IOCs) are coming under excessive pressure to reduce their crude oil production and also divest of their oil and gas assets. As a result, their combined production has been declining steadily. Furthermore, they are finding it very difficult to replace the reserves they used because of resurgent resource nationalism.

    All in all, production by OPEC+, US shale and IOCs could leave the market in deficit by an estimated 2-3 mbd in 2022 widening to 5.0 mbd by 2023.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • George Doolittle on October 17 2021 said:
    The only reason the entire Middle East has so much as a drop of oil is because of Venezuela.

    Where is that lone ship headed again?


Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News