* Poorer OPEC states lack cash to weather price shock
* Saudi/Russia fight costs producers money, market share
* Delayed spend may cost 200,000 bpd of African output
-Rystad
* Lost output could lead to further budget pain
(Recasts top, adds input on Venezuela and Ecuador and Angola
recession and budget cuts)
By Libby George
LAGOS, March 30 (Reuters) - Collapsing oil prices are
costing some OPEC members not only lost revenue when they most
need it to tackle the coronavirus crisis, but also market share
they may never recoup.
OPEC producers such as Nigeria, Angola, Algeria and
Venezuela cannot compete with the lower costs of erstwhile
allies Saudi Arabia and Russia, who are flooding the market.
The Republic of Congo's oil minister wrote to OPEC secretary
general Mohammad Barkindo this month asking for urgent talks to
help to keep some members from sliding into recession.
But while desperate for OPEC+, the Organization of the
Petroleum Exporting Countries plus Russia, to ride to the
rescue, Africa's oil producers have little leverage.
"They have no power," one Nigerian oil industry source told
Reuters. "All they can do is ask."
Although non-OPEC nations such as Britain, Norway and the
United States all have relatively high-cost production, their
diversified economies mean they are not dependent on oil.
As well as hitting already tight budgets, the oil price drop
had led oil majors to cut billions from spending plans. The
longer-term impact for these nations' comparatively costly
fields could be far more painful.
"Companies are reviewing their whole portfolios on a daily
basis," said Roderick Bruce, principal research analyst for
Africa at IHS Markit, which forecasts final investment decisions
on the continent could hit historic lows this year.
"They (African countries) are in a very difficult position,"
Bruce added, citing their higher production costs.
In Nigeria, for instance, production is forecast to fall by
35% without offshore field investments. Across Africa, Rystad
estimates delayed spending could mean 200,000 barrels per day
(bpd) drop in expected output by 2025. discipline that's going to be introduced will be a
shock to the system," said Alex Vines, head of the Africa
Programme at British think-tank Chatham House.
"This is really different terrain, and these are very
vulnerable economies," Vines added.
The pain is even more acute in Venezuela, a founding member
of OPEC, which is also dealing with U.S. sanctions,
hyperinflation and exports limited by the loss of U.S. refinery
buyers. Now Venezuela and others also face tougher competition from
larger nations that are elbowing smaller sellers out of
incredibly competitive spot trade.
They cannot match the agile, aggressive marketing that saw
Saudi Arabia slash its selling prices almost immediately after
the collapse of the OPEC+ deal. By comparison, Nigeria took nearly two weeks to make record
cuts to its official selling prices.
The country is also struggling to sell its oil, which is
rich in the gasoline and jet fuel that the world is not using as
a result of the coronavirus pandemic. Venezuela's flagship Merey 16 crude has been selling at just
$8 per barrel due to a combination of falling demand and U.S.
sanctions, while Ecuador's Napo and Oriente heavy crudes have
remained below $15 per barrel.
While Angola's production has fallen from close to 2 million
barrels per day (bpd) a decade ago to 1.4 million bpd, it had
been in the midst of reforms which were meant to boost output.
And Equatorial Guinea is trying to auction new licenses and
find a replacement for ExxonMobil, which wants to leave.
CASH CRUNCH
The sudden cash crunch is also hindering the ability of
these oil producers to manage growing coronavirus outbreaks. A
group of African finance ministers has called for a $100 billion
stimulus package to help deal with the pandemic. President Nicolas Maduro said this month that Venezuela is
selling its oil below production costs, though he did not
announce any action to offset the revenue loss.
Ecuador's Vice President Otto Sonnenholzner, meanwhile, said
his country is struggling as it faces a $325-million payment
this month as part of a debt repurchase deal. Health systems across these OPEC producers are already
chronically underfunded and living conditions dangerously
cramped, while the oil crunch also casts doubt on whether
nations can craft rescue packages or pay soldiers and police to
enforce lockdowns or combat unrest. In Venezuela, water supply problems led some hospital staff
to use paint buckets as improvised toilets, and shortages mean
workers re-use medical gloves. Nigeria, which cut nearly $5 billion from its budget, said
it needs 120 billion naira ($333.33 million) to fight the
coronavirus outbreak. Algeria, whose public debt rose to 45% of gross domestic
product at the end of last year from 26% in 2017, plans 30%
public spending cuts and has directed state energy firm
Sonatrach to halve planned investment to $7 billion.
Angola said it will experience its fifth year of recession
in 2020, plans to slash its budget, but protect health and food
spending, while debt-ridden Congo Republic has been trying to
renegotiate $1.7 billion of oil-backed loans. = 360.0000 naira)
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Fiscal Breakeven Price https://reut.rs/2vWQKqy
Estimated 2020 cash costs for different oil fields https://reut.rs/3dGTl8U
Oil producers rising debt ratios https://reut.rs/2Jormx5
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