OPEC’s production allocation policy is undergoing its most significant change since the group was established in 1960. It shifts the emphasis from politically negotiated production baselines to a technically based, audit-driven system centred on the maximum sustainable capacity (MSC) metric for the OPEC+ alliance, which includes the original OPEC members and a group of non-OPEC partners led by Russia.
For many years, the main disagreement within the group has been the setting of “reference production” levels used to determine supply cuts or increases. The gap between declared quotas and actual production capacity has widened over time, leading to a credibility deficit that risks undermining OPEC’s role as a global player. The MSC audit framework aims not only to resolve long-standing internal disputes over quota allocations but also to restore trust, stability and investor confidence in the group’s influence in the global energy sector.
In the crude oil market, capacity is crucial for a country's ability to influence prices, secure supply and serve as a cushion during times of geopolitical or technical disruption. For a group such as OPEC+, capacity is vital in maintaining market discipline. If a producer claims high capacity without verification, it may unfairly sway quota negotiations by aiming for a larger market share than its infrastructure can support. Conversely, underestimated or unclear capacity generates market uncertainty, often resulting in a higher geopolitical risk premium because traders cannot reliably assess the buffer available in case of sudden supply disruptions.
Why capacity matters
Historically, the gap between what OPEC+ members claimed they could produce and what they actually supplied has led to the phenomenon of ‘ghost barrels’ or unaccounted oil in official supply and demand data. Verifying an MSC is likely to resolve this issue, improving the accuracy of supply-demand balances and providing the market with more reliable data on available spare capacity buffers. This is achieved by ensuring that future quotas are based on what each member can technically produce and sustain.
It is evident that the definition of oil production capacity underpins a nation’s ability to influence prices, secure supply and act as a ‘shock absorber’ for the global economy during periods of geopolitical or technical disruption. For a producer group such as OPEC+, capacity also forms the basis of market discipline. When a producer claims unverified high capacity, it can exert unwarranted influence over quota negotiations, potentially claiming a larger share of the market than its physical infrastructure allows. Conversely, if the capacity is underestimated or unclear, it generates market uncertainty, often resulting in a higher geopolitical risk premium as traders cannot accurately assess the available buffer against sudden supply shocks.
The OPEC+ secretariat defines MSC as the average maximum daily number of barrels of crude oil that can be brought online within a 90-day ramp-up period and sustained continuously for a full year, including all scheduled maintenance activities. Consequently, it differs from theoretical metrics such as nameplate capacity. The latter indicates the maximum output a facility was designed to handle at the time of construction, thereby overlooking real-world factors such as natural field decline, rising water-to-oil ratios over time and the necessity for scheduled maintenance.
Comparing MSC definitions
OPEC+’s definition of MSC will lead to a different understanding of surplus capacity compared with those provided by the IEA and the US Energy Information Administration (EIA). The IEA’s concept of spare capacity was developed to facilitate emergency response, specifically the speed with which barrels can be injected into the market during a crisis. It describes it as “capacity levels that can be reached within 90 days and sustained for an extended period”. While it is often interpreted as several months, it does not strictly require a full year of sustainment.
Conversely, the US EIA distinguishes between its own version of the MSC and “effective production capacity”. The agency states that MSC is the highest theoretical output rate achievable within a year, assuming full utilisation of current production capacity and no disruptions. Effective production capacity, on the other hand, refers to crude oil production that can be reached within 90 days and maintained using reasonable practices to prevent damage to oilfields or their operations.
The OPEC+ MSC is, therefore, inherently the strictest, as it explicitly includes planned maintenance in the sustainable volume over a full year. By requiring year-long sustainment, OPEC+ has effectively combined the IEA’s emergency-response logic with the EIA’s operational realism while adding a durability test neither explicitly requires.
From baselines to technical verification
The shift to an audit-driven MSC mechanism is a direct response to the failure of the ‘historical baseline’ model that has guided OPEC+ since its inception. Since the formation of the Declaration of Cooperation (DOC) in 2016, the alliance has primarily used production levels from specific, politically negotiated months as the reference point for all subsequent actions. October 2018 was chosen as the main baseline for most of OPEC+ in recent years because it represented a time of relatively high, free production before the first major rounds of supply cuts. It caused problems, for example, when production cuts reached nearly 10m b/d on paper in 2020, but the actual cuts remained significantly below those levels. As the global economy recovered from the impact of the COVID-19 pandemic, it became clear that many members could no longer return to their 2018 levels due to natural decline rates of up to 8% annually. Therefore, the baseline system no longer accurately reflected the alliance's actual capabilities.
At the OPEC+ ministerial meeting in June 2023, the UAE and several other members successfully lobbied for upward adjustments to their baselines to reflect recent infrastructure investments. In fact, the UAE had been complaining about the unfavourable baseline since 2021. Mature producers with declining output had their baselines reduced in 2023 to better reflect their actual production levels. Nigeria and Angola experienced significant downward revisions to their baselines. Consequently, it was no surprise that Angola decided to leave the organisation in December 2023, effective 1 January 2024, ending a 16-year relationship.
OPEC+ experienced a decline in its share of the global oil market from 2016 to 2024 as producers in the Americas—such as the US, Guyana and Brazil—rapidly increased output. To regain this market share, the alliance recognised the need to encourage its members to expand capacity and compete by increasing volumes. The MSC mechanism will facilitate this process by shifting from a ‘price-defence’ strategy to a ‘volume-recovery’ approach.
To ensure the objectivity of the new MSC framework, OPEC+ has mainly delegated responsibility for capacity assessment to independent third-party experts. This method aims to prevent members from self-reporting inflated figures and to provide the OPEC Secretariat with a ‘technical shield’ during baseline negotiations.
FIG.1: CAPACITY DEFINITIONS
| EIA (effective capacity) | |||
Implementation of the new framework
The primary responsibility for auditing 19 of the 22 OPEC+ members has been assigned to Dallas-based petroleum consultancy DeGolyer and MacNaughton (D&M). D&M holds a unique position of trust within the industry, having previously conducted the high-stakes audit of Saudi Aramco’s reserves before its 2019 initial public offering. The company has been authorised to review field-level infrastructure, reservoir management and investment programmes. This will be achieved by evaluating well conditions and age, analysing pressure maintenance and enhanced oil recovery programmes, and reviewing sanctioned projects and planned drilling schedules.
As Russia, Venezuela and Iran objected to a US company accessing their technical data and oilfield infrastructure, a non-US company will undertake the MSC assessment of Russia and Venezuela.
Although not officially confirmed, an Indian firm is reportedly set to be appointed as the alternative auditing authority for these producers’ review. This choice could be due to India’s neutrality and pragmatic relations with Russia, Venezuela and other OPEC nations. India has several engineering and energy consulting firms capable of upstream field audits and, more importantly, they are not subject to sanctions.
Iran’s capacity for 2027 will be based on its actual average production during August, September and October 2026, as verified by OPEC’s secondary sources. Iran is subject to strict US and international sanctions, making it impossible for a US‑based auditor to collaborate with Iranian operators.
Unlike Russia and Venezuela, which will employ a non‑US auditing firm, Iran’s sanctions environment is considered too restrictive even for that workaround. OPEC+ has therefore chosen a production‑based baseline, relying on secondary‑source reporting already used for quota compliance. This means that Iran’s MSC will not be a technical assessment of field capacity and will not reflect its true geological or infrastructural potential. Nonetheless, secondary‑source production estimates are widely used for quota compliance and are regarded as consistent and methodologically transparent.
To fully appreciate the significance of the MSC audit, the technical realities of field decline and water-cut issues must be considered. As a field matures, the water cut, or the ratio of water produced to oil, increases. A field that could ‘sustainably’ generate 4m b/d five years ago might now require 30% more energy and infrastructure to produce 3.8m b/d, as it also lifts and processes millions of barrels of water. The MSC audit conducted by firms like D&M will account for this, as it will establish a cap on MSC regardless of how much oil remains underground.
Winners and losers
The implementation of the MSC could reveal a division within OPEC+ between a small group of high-growth, well-capitalised producers and a larger group of mature or declining producers whose fields are nearing late-life asset profiles.
The Gulf Arab states—Saudi Arabia, the UAE and Kuwait—have the world’s lowest-cost reserves and the fiscal capacity to fund significant upstream projects regardless of short-term price fluctuations. For these nations, the MSC framework offers an opportunity to formalise their market dominance. Iraq, a low-cost producer facing ongoing infrastructure and security challenges, hopes the MSC audit will establish a clear technical baseline that could enable it to increase production whilst remaining ‘in conformity’ with a revised, higher baseline.
A larger group, comprising mainly African and Central Asian producers, could face systemic marginalisation under the MSC system. These nations must confront ageing infrastructure, rapid declines in key sectors and pressure from foreign investors motivated by regulatory uncertainties or ESG concerns.
Angola’s exit from OPEC serves as a warning for the new mechanism, and Nigeria, for example, may face similar pressures if it cannot demonstrate the ability to increase production within 90 days and maintain it for a year; this would mean its baseline would be permanently reduced.
There may be other flaws in the MSC mechanism despite its expected benefits. Many OPEC+ countries remain cautious about perceived losses of national sovereignty, as they consider oilfield data a state secret and view allowing foreign consultants—especially from the US—to audit their oil assets as a significant political concession.
There is a risk that the audits will reveal that some producers have deliberately or unintentionally overstated their reserves or sustainable capacity for years to maintain their political standing within the group. This does not bode well for the reputation of these nations’ NOCs and could lead to political instability, although OPEC+ has historically managed similar tensions. The most intense tension is expected in late 2026, as the results of the D&M and Indian firm audits are finalised for the 2027 quota year.
The MSC mechanism could also trigger a capacity race, as each member attempts to maximise its capacity to secure a larger baseline. This might lead to a substantial supply surplus, which, if released into the market, could cause a price crash unless the spare capacity is held in reserve.
Despite these concerns, the main aim of the MSC framework is to tackle overproduction by closing loopholes that previously allowed non-compliance under the old baseline system. By setting the baseline based on the audited MSC, the alliance demands genuine reductions from any member asked to lower output.
Under the previous system, a country with a baseline of 2m b/d but a physical capacity of 1.8m b/d could ‘cut’ 100,000b/d and still operate at its physical maximum, effectively contributing nothing to the group's stabilisation efforts. The new mechanism closes this loophole, ensuring the group’s supply measures are physically meaningful.
Although the alliance has become more assertive in its use of compensation barrels and in requiring overproducers to make additional cuts in future months, the MSC audit will further strengthen the technical enforcement. When verified records support a country's field-level capacity, it becomes much harder for that nation to claim that its overproduction was a technical error or an operational spike. Therefore, the measure will significantly close the loophole for cheating.
Broader implications
OPEC+'s redefinition of capacity shapes global oil prices, the competitive environment with non-OPEC producers and the speed of the worldwide energy transition. Verified spare capacity serves as a buffer for the global economy. When the market trusts the volume of oil that can be brought online within 90 days, the uncertainty premium linked to geopolitical events decreases.
The coordinated expansion of OPEC+ capacity, supported by the MSC framework, directly challenges high-cost producers in the Americas. OPEC+ can manage production more precisely and maintain prices high enough to fund its budgets, while keeping them low enough to squeeze the margins of competitive producers, who are more sensitive to capital costs.
The redefinition of capacity will also encourage producers to maximise output now rather than hold back if oil producers believe that long-term demand for fossil fuels will decline due to the energy transition. This could lead to a short-term increase in supply, lowering prices and hindering the transition by making gasoline more competitive with electricity for cars.
The redefinition of capacity through the MSC framework signifies the most important shift in OPEC+ policy in recent years. Moving from political negotiations to technical verification, the alliance aims to modernise its governance and restore influence in global energy markets. This approach could enhance its credibility by reducing unaccounted-for oil volumes and establishing a mechanism that encourages long-term upstream investments, especially in low-cost Gulf states.
The transition carries risks, as it might create a divide between high-growth and mature producers, potentially leading to more exits from the alliance. Nonetheless, the goal is to produce more precise data, minimise volatility and provide a more predictable measure of surplus capacity as a safeguard for the oil market. The world is heading towards a petroleum landscape where power is determined not by what a country claims to produce, but by what independent auditors verify it can sustain. Whether the MSC framework consolidates OPEC+ leadership or exposes its structural divisions will depend on transparency and trust, two key factors that could shape the future energy order.
Comments