US embassy cable - 04LAGOS698

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