London — Nigeria's full compliance to the OPEC+ deal hangs on a key oil grade being treated as a condensate.
Since OPEC+ allowed ultra-light oil to be exempt from its production cut deal, the West African nation's Agbami has been a bone of contention.
The challenge is that nobody from international oil companies to those that monitor OPEC output can agree on whether it should be classed as a crude or not.
Nigeria's oil ministry officials are asking international oil companies like Chevron and Equinor to reclassify Agbami as a condensate rather than a crude, sources close to the matter said this week.
A representative at Nigeria's oil ministry confirmed Agbami as a condensate, saying the pressure volume temperature analysis characterization of Agbami's reservoir fluids prove it is not a crude.
But the field's partners are not on the same page.
Chevron, which operates the Agbami field and FPSO, have always listed the grade as a crude on their website, and markets it as light, sweet crude oil to its customers.
Similarly, equity partner Equinor also classifies the grade as a light, sweet crude, according to its website.
Trading sources have told S&P Global Platts that the grade is marketed as a light, sweet crude, as it is not derived from a gas condensate field.
Lagos-based Famfa Oil, which also holds a stake in the oil field, has also termed it as a crude oil on its website.
A spokesman at Equinor declined to comment when asked if the ministry had contacted the company on the categorization of Agbami.
Representatives at Chevron and Famfa were unavailable for comment.
Agbami has an API of over 47.9 degrees and a sulfur content of 0.04%, with production ranging between 160,000 b/d and 250,000 b/d in the past 12 months, according to Platts estimates. Agbami is a popular grade among global refiners, and is regularly exported to a wide array of countries like India, Australia, Spain, the Netherlands, China, Brazil.
It is very similar in quality to Akpo, which is, however, called a condensate by all parties.
Sources said the deepwater Akpo field since its inception has always been termed a gas condensate field by its partners.
Total, which operates the Akpo field, has consistently called it a gas and condensate field.
However, the Agbami field, which struck first oil in 2008, was then also referred to as a crude oil field that also produced some natural gas liquids (NGLs), by its equity partners.
OPEC+ cuts
Africa's largest oil producer is under pressure to adhere to the OPEC+ output cuts.
The current output cuts by OPEC and its nine non-OPEC allies, are focused on crude and not condensate.
Nigeria's compliance with OPEC+ cuts has not always been up to scratch, drawing the ire of several OPEC members. August and September are crucial months in the deal as those that have failed to meet their quotas since May have to make up the difference.
One of the reasons for this has been the inclusion or exclusion of Agbami.
Platts, one of the secondary sources that monitors compliance, includes Agbami in Nigeria's crude oil figure as it is marketed as a crude export blend and not a condensate by the state-owned Nigerian National Petroleum Corp. and international oil companies.
Nigeria was well above its cap in July, producing 1.56 million b/d, according to the recent Platts OPEC survey. However, the country and OPEC officials say its offshore Agbami grade should be re-categorized as condensate.
Platts estimates Agbami production at about 160,000 b/d for July. Stripping that out from Nigeria's production would propel the country's quota compliance to 103% from 65%.
To make things even more complicated, three out of the six secondary sources that OPEC uses, include Agbami as a crude while three do not.
Under the latest OPEC+ deal Nigeria had committed to keeping its crude output at 1.412 million b/d in May, June and July, down 417,000 b/d from its baseline of 1.829 million b/d.
From August through December it is obliged to pump 1.495 million b/d, while from January 2021 to April 2022 it will cap production at 1.579 million b/d.
Since 2017, when the OPEC+ cuts first began, Nigeria has insisted that its condensate production amounted to 350,000 b/d to 400,000 b/d out of Nigeria's total production capacity of 2.2 million-2.3 million b/d.
The ministry counts the Agbami, Akpo, Ima, Oso and Escravos streams as condensate.
In 2019, Nigeria was also looking to classify Egina, its newest export grade as a condensate. But NNPC now lists Egina as a medium sweet crude, boasting of 27.40 API and 0.17% sulfur.
Condensate dilemma
The definition of condensate has always been a complicated one for the oil industry.
Condensates usually exist as gas, where they are extracted from high-pressure reservoirs but when they rise to the surface they turn into liquids.
Some analysts however insist it depends on which type of field it is produced from – a gas or an oil field.
In 1988, OPEC attempted to define the way it looks at crude and condensates.
The definition was based on the composition of production stream mainly based on the gas to liquids ratio and API gravity, and a variety of tests were included to measure if it was a crude or condensate.
Oil service firm Schlumberger, in its oil glossary, says a condensate generally occurs in association with natural gas and the API gravity of condensate is typically 50 degrees to 120 degrees.
"Its presence as a liquid phase depends on temperature and pressure conditions in the reservoir allowing condensation of liquid from vapour," adds Schlumberger, noting that the production of condensate reservoirs can be complicated because of the pressure sensitivity of some condensates.