The Little Guys of the Oil Business

Meet the “marginal producers.”

With the stream of alarming news coming from Iran, Iraq, and Nigeria, media reports of turmoil in places like Chad and Ecuador often go unnoticed. But in an exceptionally tight energy market, political uncertainty in some of the world’s largest energy-exporting states gives new importance to the so-called marginal producers: countries that produce between 100,000 and 1 million barrels of crude oil per day. That’s why markets took note when Chad’s president, Idriss Deby, threatened in April to shut down his country’s 180,000 bpd of oil production, and when Ecuador’s parliament passed a law in March that substantially increases the government’s share of oil profits at the expense of the foreign firms operating there.

The world’s oil suppliers are still able to provide the 85 million bpd that the world now consumes

Consider Chad, one of the world’s poorest countries. The World Bank had conditioned financial support for Chad’s oil industry on a government pledge to allow the bank to direct 85 percent of energy income into badly needed poverty-reduction, health, and education programs in the country. In January, when Chad’s parliament voted to funnel more of the proceeds directly into the country’s treasury, the bank froze the funds. Armed with new market influence provided by global price increases, in April Deby threatened to shut down all Chad’s production unless a consortium of foreign firms led by ExxonMobil paid his government about $100 million in taxes.

Deby needs the money. On April 13, Chad’s military repelled a surprise rebel attack on N’Djamena, the capital, that was intended to oust him from power. Hundreds of rebel fighters were killed. But unless Chad’s military receives an infusion of cash, its government cannot quell the unrest produced by those who don’t share in the country’s natural wealth or support Deby’s approach to the violence in neighboring Sudan.

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