UAE Withdrawal from OPEC Weakens Cartel, Offers Lessons for Nigeria

The United Arab Emirates officially exited the Organisation of Petroleum Exporting Countries and the wider OPEC+ alliance on May 1, a decision that has sent shockwaves through the global oil and gas industry.

Until its departure, the UAE was the cartel’s fourth-largest producer and had been a dedicated member of OPEC for 60 years. The United States Energy Information Administration credits the UAE with a daily crude production of 4.6 million barrels, giving it a four per cent share of the world’s total. The country holds an estimated 111 billion barrels of proven crude oil reserves.

Citing national interests, future production capacity, and a desire for flexibility to ramp up output amid rising global demand, the UAE chose to rid itself of the cartel’s quota stranglehold. The country’s Energy Minister, Suhail Al Mazrouei, stated that the world needs more energy and more resources, and the UAE wanted to be unconstrained by any groups.

The decision further weakens OPEC, which now has 11 members left, with Saudi Arabia as the leading producer. The list is now dominated by African nations, including Algeria, Congo, Equatorial Guinea, Gabon, Libya, and Nigeria.

The UAE’s exit did not come as a complete surprise to keen watchers, given its clear intention to ramp up production. The Abu Dhabi National Oil Company has set an ambitious target to increase crude oil production capacity to five million barrels per day by 2027, moving up its earlier 2030 target by three years. The UAE has been investing heavily in increasing hydrocarbon production capacity and developing midstream and downstream infrastructure.

For analysts, the exit holds key lessons for Nigeria, Africa’s largest oil producer. Nigeria has had a topsy-turvy relationship with OPEC since joining in 1971. Faced with numerous challenges, the country’s oil production has dwindled from a previous OPEC quota of 2.2 million barrels per day to below the current figure of 1.71 million barrels per day.

While the pegging of quotas has benefited Gulf nations with sizeable fiscal buffers, it has proven unhelpful to Nigeria, which lacks the spare capacity of top producers like the UAE. Nigeria has set ambitious targets to ramp up crude oil output to 2.5 million barrels per day by 2026, but the government has adopted a more conservative target of 1.8 million barrels per day, reflecting a recurring gap between ambition and reality.

Another key difference lies in investment and sovereign wealth. The UAE has set its sights on investing $150 billion up to 2030, while the Nigerian National Petroleum Company is targeting at least $30 billion in investment by the same period. The UAE’s sovereign wealth funds now hold more than $1.7 trillion, allowing the country’s economy to depend more on global economic fortunes than on the price of oil.

In contrast, Nigeria’s 12-year-old sovereign wealth fund is planning to double from $3 billion to $6 billion. The country recently decided to channel 30 per cent of frontier oil and 30 per cent of gas to the Federation Account instead of the sovereign wealth fund.

Observers note that Nigeria could learn from the UAE’s decision to prioritise national interest, production flexibility, and long-term investment strategies over rigid cartel quotas. Several other nations, including Indonesia, Qatar, Ecuador, Angola, and Gabon, have also quit OPEC mainly due to disagreements over output quotas.