The concern over what can be classified as crude or condensate has become intense after Nigeria began to pump above OPEC’s supply cap. S&P Platts said Nigeria pumped 1.88 million bpd in February, 190,000 bpd above its cap.
Now Nigeria has started production from Egina, a new deepwater field, which Ibe Kachikwu, minister of State for Petroleum Resources, said he might seek OPEC classification condensate, which is not subject to quotas.
What is condensate?
According to an online platform drillinginfo.com, condensate is a very light hydrocarbon with an American Petroleum Institute (API) specific gravity of greater than 50 degrees and less than 80 degrees which can exist separately from crude oil or dissolved into crude oil.
Schlumberger oil field defined condensate as a low density, high-API gravity liquid hydrocarbon phase that generally occurs in association with natural gas.
Condensates are liquefied once extracted from high-pressure reservoirs, where they exist as a gas. Nearly all oilfields produce some condensates, usually in small amounts. Once it becomes a liquid, there is no widely agreed way to differentiate condensate from crude.
How much condensate does Nigeria produce?
Akpo is the only substantial Nigerian grade marketed as condensate, which is typically exported at a rate of 100,000-133,000 bpd. Also, production of another condensate grade, Oso, has declined so substantially that it is blended into Qua Iboe crude exports.
In 2017, the Paris-based International Energy Agency (IEA) began counting another Nigerian grade, Agbami, with 220,000-250,000 bpd of exports, as condensate. Oil traders say the grade is marketed as crude oil, and the IEA declined to give a reason for the change.
Under IEA figures counting Agbami and Akpo as condensate, Nigeria’s crude production has not hit 1.8 million bpd since November 2015.
Wood Mackenzie estimates that export grades aside, roughly 12 percent of Nigeria’s production could be classified as condensate but that it could be higher. This cloudy, but sizeable, chunk of output could keep Nigeria from capping.
What does condensate mean for OPEC?
OPEC’s crude oil production in February modestly declined to 30.80 million bpd in February, the survey showed. The figure is a 60,000 bpd drop from January and is the group’s lowest output level since March 2015, when Gabon, Equatorial Guinea and Congo had yet to join the organization.
Analysts said that despite the fall, OPEC still has more cutting to do to fully comply with its supply accord that went into force in January.
What does this condensate for Nigeria’s economy?
Dili Nwabueze, Engineer with oil and gas firm TMD Limited said condensate is more profitable than crude oil on equal volume basis as its price is comparable to the price of naphtham, an intermediate hydrocarbon liquid stream derived from the refining of crude oil.
“Nigeria deserves the greatest benefit of hydrocarbon condensates, which occur in substantial quantities in our oil and gas fields. However this can only be realized if the government identifies with this objective and provides appropriate legislation that is consistent with well-known technological approach to the exploitation of this special hydrocarbon resource,” Nwabueze said.
The 2019 budget proposal, presented to the National Assembly on December 19, by President Buhari, was based on oil production of 2.3 million bpd (including condensates), with an oil benchmark price of $60 per barrel.
DIPO OLADEHINDE
