Oil projects to suffer delays over crude price decline — NNPC

27 January 2015,  Abuja – The Nigeria National Petroleum Corporation, NNPC, has warned that a number of oil projects in the country are expected to suffer delays due to the continuous decline in crude oil price.

Managing Director, Nigeria National Petroleum Corporation, NNPC, Dr. Joseph Dawha, disclosed this at the opening ceremony of the 19th Offshore West Africa Conference held in Lagos.

Joseph Dawha, NNPC GMD

Dr Joseph Dawha, NNPC GMD

Represented by the Group General Manager, National Petroleum Investment Management Service, NAPIMS, Jonathan Okeh, Dawha said,”A large number of deep water projects will suffer delay. This projects include; Three in Nigeria, One in Angola and One in Ghana. While in shallow waters, we have two projects in Angola, one in Nigeria and two in Ghana.”

He however noted that despite the hard times, the country has always responded positively to such short comings. “If we can recall, in 1986, 1998 and 2008, the country responded with innovation by applying the right balance of incentives because the oil and gas industry is important in the overall economic outlook of the country.”

He further stated that Politics, economic instability, technology and the environment are always the critical factors in the oil and gas business, which is often referred to as the four forces.

“The current price in the oil price has caused the combination of factors mainly lower than expected demand growth. This is mostly due to lower growth in China and in Europe. All this factors poses significant implications to the oil and gas industry.

“At current price levels, a large majority of fields will continue to be economic. However, many companies have had to stretch cash flow statement and would have to reduce capital expenditures to maintain healthy balance sheet.

“This will result in delays in the development of otherwise economic viable projects. Many analyst are of the view that at this level, 80 percent of North America light tight oil wells will still be in the money at $80 per barrel, but that cash flow concerns might reduce spending in the medium time.Meanwhile, some project may still be viable at $50 dollar per barrel, however delays in major projects will be a features in many companies plans and programmes especially for larger offshore and oil projects as companies tries to balance cash flow project.

Moreso, he explained that the challenges in the oil and gas industry as associated with the falling oil price, is simply the inability to manage major projects through cries and fiscal uncertainty.

Also speaking, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr. Ernest Nwapa, argued that the declining oil price is not new and therefore does not call for panic.

He stated that when such as this time the best option that should drive the mind of the players is to be innovative rather than panicking.

In his words “there is no course for panic over the fall of oil price because oil price is something we are familiar about that goes up and down. When it goes down like this the option is to be innovative rather than panicking.

“However, Let us not threaten the progressive steps we have taken to bring about local content. Do not remove the small progress created especially in the local content point of view.

“We would respond the way Nigerians had in the past successfully to make sure that cost are lower. The industry is capable of doing that . It is a panicking situation to start saying reduce the local content scope because it is costing more money, because local content reduces cost and that is the reality.

He noted that over 7 billion investment that came in to the country in the last four years has been translate to knowledge of jobs, technologies and making possible Nigeria owning assets and thereby having capacity to execute projects not restricted to the oil and gas industry. This is because the oil and gas industry only creates platform for creating this things.

“What we now know is that even for the power sector, these companies can also by little trickling do work for the power sector and that is one key message that we need to continue pushing.

So Nigeria content has come to stay and the capacities we have in Nigeria, yards, technologies, shale computing power, communication supports, indications support in the country, can be deployed and its a very important take away.

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