Kunle Kalejaye 22 January 2015, Sweetcrude, Lagos – Indications have emerged that 35 high-intensity offshore and oil sand projects in Nigeria and other parts of the world, expected to go through Final Investment Decision, FID, by the end of this year, could be delayed or cancelled entirely as a result of the current free-fall in crude oil prices.
Offshore oil rigs
Deep water and shallow water projects would also be affected, according to the Group Managing Director, Nigerian National Petroleum Cooperation, NNPC, Dr. Joseph Dawha, who disclosed this at the ongoing 19th edition of the Offshore West Africa, OWA, conference in Lagos.
Eleven of these projects, according to the NNPC boss are deep-waters projects in Nigeria, Angola, Ghana, UK, Israel and the US while 17 are mid-water projects in Nigeria, Angola, Ghana, UK, Norway, Ireland, China, Azerbaijan as well as Malaysia, Indonesia, Australia, Mexico, Brazil and the Falkland Islands. Seven others are oil sand projects, all located in Canada.
Cancelling these projects would eliminate $116 billion in capital expenditure by the end of the decade, Dr Dawha stated.
He also explained that many companies would have to reduced capital expenditure to maintain healthy balance sheet which will result in delays in the development of economically attractive projects.
But, he added that some projects could still be viable at $50 per barrel oil price as he insisted that delay in major projects would now be a feature in many companies’ plans and programmes.
Speaking about Nigeria, he said, “The challenge for the industry is how to manage major projects through both price and fiscal uncertainty.
“As in the past, namely 1986, 1998 and recently 2008, Nigeria has always responded with innovation and the right balance of incentives as this industry is important in the overall economic outlook of our country”.
Dawha expressed the hope that the deliberations at the OWA conference would “lead to a sharing of ideas that will sustain our industry through these economic cycles”.
“Going forward, the question is what will drive the pricing regime? We have moved from a balanced regime where Saudi Arabia was the swing producer to a ‘loosening’ regime where US onshore production plays a major role in price setting,” he added.