10 February 2015, Abuja – Nigeria, among other countries may risk over N5.1 trillion ($30 billion) worth of oil and gas pipelines projects due to the persisting decline in crude oil price. As it stands, some major infrastructure project pipelines are being threatened of being heavily curtailed, as falling oil prices force those governments reliant on oil revenues to make cuts, this is according to the Business Monitor International, BMI’s Infrastructure Key Projects Database.
The report studied major oil producing and dependent countries like; Iran, Iraq, Russia and Nigeria, as having at least $30billion of projects at risk.
The report said: “the current oil price environment will put a strain on infrastructure projects around the world. We have already seen the cancellation of petrochemical projects in Saudi Arabia and Qatar and we expect that across most markets oil and gas pipelines and industrial construction projects in the refining sector will likely face similar prospects.
However, forecasts predict that over the coming years, the impact will have a much broader effect on some markets in particular, adding that these countries risk project completions because of the falling oil strides.
“With this in mind we highlight Iran, Iraq, Nigeria and Russia as markets with sizeable portions of their project pipelines ($30bn plus) in the planning stages which are vulnerable to cutbacks.
Continuing, it maintained that “also with the instability in the crude price, questions are raised over the country’s fiscal sustainability and ability to fund its infrastructure plan. This is because the country has one of Africa’s largest infrastructure project pipelines, with $65bn worth of projects across all sectors in the planning phase.
“Despite running a small budget deficit in recent years, fiscal pressures have been steadily rising. Faltering oil production and unbudgeted spending associated with elections scheduled this month have seen fiscal buffers eroded. With oil – which accounted for an estimated 65 percent of government revenue in 2014 – set to stay within the $55-65 per barrel (/bbl) range over the coming years – these pressures will intensify.
“Although infrastructure has been a key goal of the President’s growth and transformation plan, we expect that current, rather than capital, spending will win over when spending retrenchments need to be made,” the report stated.
It noted that the country plans to privatise transport infrastructure over 2015 which could see projects protected from government cutbacks, however, with elevated risks owing the upcoming elections, private investors are likely to be cautious over the short-term.