24 April 2015, Lagos – Oil majors in Nigeria, under the aegis of Oil Producer Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI) has warned that Nigeria is at risk of losing $10 billion, about N2 trillion of its revenue from oil and gas in 2015, unless a significant improvement is recorded in the prices of crude oil in the international market.
“We estimate that if crude oil prices average $53 per barrel in 2015, compared to $77.5 per barrel in 2014, the Federal Government of Nigeria’s oil and gas revenue will decline by an equivalent of $10 billion this year, or a gut-wrenching equivalent of 30 per cent,” said Elisabeth Proust, Chairperson of the OPTS.
Proust, who was speaking at the Society for Petroleum Engineers’ (SPE) 2015 Oloibiri Lecture Series in Abuja, noted that the country has already started feeling the impact of the low oil price, as evident in the slowing down or outright cancellation of a number of infrastructure projects across the country.
She further stated that low crude oil prices have significantly reduced the level of investable funds of the operators, especially at a time when competition for investments is sharpening and has also made it very difficult for the Federal Government to meet its Joint Venture funding needs.
She said, “In response to this challenging price environment, businesses are adding more rigour to cost optimisation programs to boost bottom line. However, most of the cost drivers in our industry are relatively inelastic in the short term — one to two years — due to existing contract commitment.
“Additionally, in Nigeria, long contract approval times and other bureaucracy further slow any gains from cost adjustments to low crude oil prices.”
For the oil and gas industry to unlock its potentials and help position Nigeria to be able to attract the required investment, Proust maintained that the Federal Government has to create a conducive business environment, provide the necessary funding of joint ventures with the Nigerian National Petroleum Corporation (NNPC), and ensure globally competitive fiscals and domestic gas process.
According to Proust, unlocking the oil and gas industry’s potential could add about 1.5 million barrels of oil equivalent production by 2020.
Also speaking, Mr. Osagie Okunbor, Managing Director, Shell Petroleum Development Company, SPDC, emphasized the need for the country to remain focus on issues that will ensure the survival and growth of the industry and the country.
Okunbor, who was represented by Mr. Bayo Ojulari, General Manager, Development, Shell Nigeria, warned against unnecessary cost-cutting measures, as well as other unwholesome practices in our quest to cushion against the effect of low oil prices.
He said, “In this period of low crude oil prices, we should make sure we do not squander the talents we have. Let us keep them, as they are essential. We should also avoid ultra-short term focus, whereby we plan and spend only for today.”