Low oil price causing fear in the industry – IOC

Leaders of the petroleum industry in Nigeria have admitted that there is palpable fear in the industry as a result of the current low price of crude in the international market.

The low price, coupled with the uncertainties in the local fiscal environment, they claim, is prompting companies to review their work programmes in the country.

Speaking at the sector’s leaders session at the on-going Nigeria Oil and Gas conference in Abuja, the Managing Director of Total Upstream, Elizabeth Proust; Shell Country Chair, Osagie Okunbor; Managing Director of ExxonMobil, Nolan O’Neal; and Managing Director of Addax Petroleum Nigeria, all agreed that there is need for the Government to collaborate with the industry to address challenges facing the sector.

NNPC-Oil

NNPC-Oil

They also had issues with the difficulties in getting renewal for licences and the multiple tendering process adopted by the Federal Government, noting that it is becoming more difficult to get things done.

According to Proust, there is fear among employees in the sector and service contractors on the future of the sector due to difficulties emanating from the low price.

She said: “It is a difficult time that we face together. There is fear. There is fear in our staff in all the companies. There is fear in the staff of the service contractors, and communities. But we have reasons to be optimistic.

“We operate in an industry which can adapt and adapt very quickly. We need to be prepared to face maybe a long period with this level of price. It is not short term impact, it is a long term impact that we need to be prepared.

“In the oil industry we have to first preserve predictions, this is important because we need to preserve most of our work programmes. We look at the future and all the companies are reviewing their business plan. We need more business for our new projects and be sure that we have the funding, the financing. And that we have also optimized these projects. And that they can survive the long period of high level of expenditure”.

She noted that it was important to for the sector to dialogue with the government on how to tackle some of the challenges facing the sector stressing that government has to understand that the operators are struggling.

She stated: “We have brought so many good things to the country and millions of people depend on oil and gas industry. Despite the price we can adapt and we are ready to discuss with the government.

“I think the OPTS is the right platform to propose dialogue with the government and this is what we intend to do and we are ready to do it. We have identified areas we can improve, for example the gas sector.

“We all know that if we want to extend the gas reserves that we need infrastructure and that we also need a deregulated gas price”.

On the impact of the low crude oil price on the company’s project, Proust explained that there is a major review of projects in Total globally and projects are being prioritized.

She warned that Nigeria needs to push for more exploration activities as it is the future and the back bone of the sector in the country.

According to her, “We reviewing our plans not only in Nigeria but worldwide. We revisiting the economic feasibilities of these projects with long span. The effect is that there will be ranking, and priorities and our shareholders to decide what project we go on with.”

On his part, Okunbor pointed out that with oil prices where they are and with all the uncertainties around the industry, this was hardly the time for parties on the government and industry sides to be doing their individual things.

“We really need to come together and agree on the priorities we have. We all have a programme that we have agreed for 2015, most of that essentially started before this radical drop in prices. So both sides need to seat together and say what is the impact of this or what do we sensibly do going forward such that we don’t get into the business of stopping projects half-way. And we end up incurring more cost.

“We have looked at a bit of that inside Shell to say sensibly, if the funding is not available and we need to hold back or delay some projects, what is the sensible way to do it?”

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