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By Carola Hoyos in London
Published: March 1 2004 22:01 | Last Updated: March 1 2004 22:01


Nigeria and Algeria have ordered international energy companies to reduce their oil production by as much as 10 per cent, the strongest signal yet that Opec this time will stick to its plan to reduce world oil production despite record prices.


Nigeria and Algeria have more international oil companies working within their borders than most members of the Organisation of Petroleum Exporting Countries.

The orders will affect the production of international companies including Royal Dutch/Shell, ChevronTexaco and Eni in Nigeria, and Anadarko and Cepsa in Algeria, which enjoyed high profits last year in part because of their unrestricted output.

Algeria, which ordered the cut from mid-February, and Nigeria, which asked companies to reduce their output from April 1, have in the past been the Opec members most reluctant to forego revenue by reducing their oil output.

In September, Opec decided to cut 900,000 barrels a day, but never did so as the anticipated rise in inventories and fall in price failed to materialise. Last month Opec agreed a further quota reduction of 1m barrels a day, bringing output to 23.5m b/d as of April 1, and this time the cartel appears to be more serious.

Opec fears a price drop as the spring begins in the northern hemisphere and its biggest consumers need less oil for heating. It argues that the drop in the value of the dollar and speculation by large institutional investors has added as much as $8 to the price.

Driven by low inventories in the US and strong demand from China and the US, oil prices on Monday were above $36, the highest mark since just before last year's war in Iraq.

The decision to go ahead with the cuts has deepened the rift between the oil cartel and its biggest customers, who are represented by the International Energy Agency (IEA).

"Opec should take into account the market is not well supplied. Oil prices are much too high. It's bad for the economy, bad for consuming countries and not very good for producing countries either," Claude Mandil, the IEA's executive director, said on Monday. adding:"Oil prices have a very strong negative effect on the global economy."

Spencer Abraham, the US energy secretary, has been increasingly vocal about Washington's displeasure with Opec, saying the US would not beg for oil and would strive for energy independence. There has been particular bitterness about the policy of Saudi Arabia, Opec's biggest and most influential member, of keeping inventories in consuming countries as low as possible to keep a strong grip on the market.

The kingdom is expected this week to reveal how much oil it will supply to its customers in April, the month in which Opec's 1m barrel a day quota reduction takes force.

Ali Naimi, Saudi Arabia's energy minister, said on Monday:"Number one in our mind is making sure there are no shortages - that the oil market is stable and well supplied because we recognise its impact on economic growth."

But he warned that Opec would not change its mind about the cuts before the group met again in Vienna at the end of this month.