Congo aims for membership of OPEC to control its oil price risk

Republic of the Congo President Denis Nguesso has pledged that the country – which has suffered badly during the oil price collapse – will no longer sit on the sidelines and has applied for membership of the Organization of Petroleum Exporting Countries (OPEC). NJ Ayuk, CEO of Centurion Law Firm, said that in January, officials from Congo announced the country’s application for membership of OPEC. He explained: “This is no small move. After years of challenges [due to] the collapse in the price of oil, Congo is emerging from this period with a renewed agenda, focused on becoming an active voice in the global stage, rather than a silent victim of international oil price swings.” Mr Ayuk believes that OPEC membership would mean greater access to information, partnerships, contacts and a voice at the decision-making table. However, the opportunities lie both ways. Holding nearly two billion barrels of proven reserves of crude oil in a vastly underexplored territory, Congo represents a sleeping giant among African oil producers. An improved business climate has brought profound benefits to the country’s oil industry. New developments by French oil company Total in Congolese territory are set to expand the country’s oil output from 280,000 barrels per day to 350,000 in 2018. Mr Ayuk suggested: “An enhanced sector outlook coupled with new discoveries and strong leadership by younger and more capable leaders is rapidly attracting the interest of investors across the world. “The election of Thérésa Goma to the position of director general of hydrocarbons in March is an example of a change in mentality, as is the ascendance of Jean Marc Tchicaya to the position of hydrocarbons minister – a younger and more dynamic figure than any of his predecessors.” Added to that, Congolese capital Brazzaville is home to the headquarters of the African Petroleum Producers Organization, a club that has been gaining renewed relevance in recent years as African leaders search for intra-African cooperation on matters of energy. Congo has also been expanding its bilateral relationships with the likes of Angola, Nigeria and Equatorial Guinea, moving towards a new policy of gas use. For OPEC, Congo’s membership means greater representation, greater control over the world’s output and, in the end, greater power. For Congo, the country will sit side by side with key oil giants like Saudi Arabia and Venezuela, as well as Gabon, Angola, Nigeria and Equatorial Guinea, further reinforcing the strength of African voices among the cartel. It will be able to learn and contribute to policy and decision-making, and it will be ever more prepared to deal with the volatility of crude prices. Congo is not alone in waking up to the opportunities beyond Africa and Mr Ayuk pointed to Equatorial Guinea as an example. Since it joined OPEC in May 2017, Equatorial Guinea gained a de facto seat at the international negotiating table. Suddenly, a nation that produces about 130,000 barrels of crude per day (which is less than 2% of Saudi Arabia’s output), is given a say on international production cuts, price-managing strategies and access to a plethora of contacts and close partnerships that would otherwise be beyond its reach. “Through initiatives like LNG2Africa and bilateral partnerships with many African counterparts, Equatorial Guinea has been pushing an African agenda in recent years that is based on the clear understanding that intra-African cooperation can have a profound impact in raising the continent’s profile on the international stage,” said Mr Ayuk. The successful results of the recent production cuts by OPEC have shown the cartel is regaining its standing on the international stage, demonstrating flexibility to the new market realities. A chief figure in the effort to bring sustainability to the international oil market has been the Nigerian Mohammad Barkindo, secretary general of OPEC. Mr Ayuk explained that Mr Barkindo spearheaded the landmark December 2016 agreement that saw the oil cartel and 11 non-OPEC members (including Equatorial Guinea at the time) sign up to a reduction of 1.8 million barrels of crude oil per day (2% of global output), which has been extended until the end of 2018 and has resulted in the progressive rise of crude oil to the more sustainable prices that we witness today. “However, OPEC cannot sit idle on its own success,” warned Mr Ayuk. “The need for coordination with several non-members for any global strategy to work also demonstrates how the organisation needs to secure a wider net and solidify its position to continue to reach its goals. “Its agenda is aligned with that of African nations at a time when these players wish to have more control over the commodities they are so dependent on.” He added: “Congo’s move towards membership of OPEC is a major landmark step that should not only be greeted and celebrated by the cartel, but also be followed by other nations across the continent. “As the world’s remaining frontier market for oil exploration, Africa is increasingly positioning itself as the linchpin region for the future of the world’s energy industry. African nations cannot afford to not be at the negotiating table when the great decisions about their future are made, neither can OPEC afford to keep them out.”

Congo aims for membership of OPEC to control its oil price risk

Want to read this article?

Read Next

New export credit scheme for Morocco

‘Every hour counts’ when dealing with extreme events, says BELFOR CEO Kolak

Dubai Aerospace receives $282m settlement for Russia-leased aircraft

Taking stock of France’s rising flood challenge

First trade credit and political risk insurance platform launched in Africa

New export credit scheme for Morocco

‘Every hour counts’ when dealing with extreme events, says BELFOR CEO Kolak

Dubai Aerospace receives $282m settlement for Russia-leased aircraft

Taking stock of France’s rising flood challenge

First trade credit and political risk insurance platform launched in Africa

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

New export credit scheme for Morocco

‘Every hour counts’ when dealing with extreme events, says BELFOR CEO Kolak

Dubai Aerospace receives $282m settlement for Russia-leased aircraft

Taking stock of France’s rising flood challenge

First trade credit and political risk insurance platform launched in Africa

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters