Crude Oil Crash: Nigeria may lose $10bn in 2015

Mrs Elizabeth Proust

Nigeria’s oil and gas revenue will drop by 10 billion dollars in 2015, if crude oil price average 53 dollars per barrel compared to 77.5 dollars in 2014, the Oil Producer Trade Section (OPTS) has warned.
Mrs Elizabeth Proust, Chairman OPTS and Managing Director of Total Upstream companies in Nigeria, gave the warning on Thursday in Abuja at the 2015 Oloibiri Lecture Series and Energy Forum.
NAN reports that OPTS is a private sector group comprising indigenous and international companies that operate 96 per cent of the total oil and gas production in Nigeria.
Proust spoke on a theme, “Global oil price dynamics: impact and strategic solution for Nigeria.”
She said the low oil price witnessed globally was having adverse impact on revenue of both producers and host government.
“Unfortunately Nigeria is not immune to this revenue squeeze.
“We estimate that if crude oil price average $53 per barrel, compared to $77.5 in 2014, Nigeria’s oil and gas revenue will decline by $10 billion this year or a gut wrenching 30 per cent.
“Total allocation to state governments was N620 billion in the last quarter of 2014, as the oil price was sliding 15 per cent lower than in the same quarter of 2013
“This is resulting in the slowing or cancelling of many infrastructure projects that Nigeria desperately needs,” Proust said.
She, however, said that in response to this challenge, businesses were adding more rigour to cost optimisation programme to boost the bottom line.
She said most of the cost drivers in the industry were relatively inelastic in the short term of one to two years due to existing commitments.
“This means that there is a time lag between movements in crude oil prices and costs. Thus, we cannot expect near-term costs relief.
“Additionally in Nigeria, long contract approval times and other bureaucracy further slow any gains from cost adjustments to low crude oil prices,” she said.
Proust said low crude oil prices had significantly reduced the level of investable funds, at a time when competition for investments is sharpening.
She said the solutions should include unlocking industry potential, redoubling efforts to improve capacity and efficiency of existing facilities and prioritise projects and investment.
Proust pledged OPTS mission to assist investors and the government to fully harness the hydrocarbon resources of Nigeria for the benefit of all stakeholders.
Dr Timothy Okon, the Group Coordinator, Corporate Strategy and Planning of the Nigerian National Petroleum Corporation (NNPC), called for diversification of nation’s economy to resolve the challenge of low oil price.
Okon said there was need for the government to create conducive business environment for investors to bring in revenue to the state.