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Mass sack, investment cuts loom as price rout shatters Nigeria’s oil industry

The foreign and local oil firms, yesterday, perfected plans for mass disengagement of workers and slash in investments as parts of measures to mitigate the effects of price rout rocking the global market.

The rout, buoyed by spread of Coronavirus and the price war between Saudi Arabia and Russia, crashed the price of oil to as low as $30 per barrel on Monday and it had, according to checks by this newspaper, became a major threat to the oil multinationals’ multi-billion dollars businesses in Nigeria and across the World.

The firms, a source at the Ministry of Petroleum Resources told New Telegraph, have already opened talks with the Nigerian National Petroleum Corporation (NNPC) – their major shareholder – on measures they have in place to reduce the effect of the oil price rout, which is expected to be far-reaching if not addressed.

“Everyone knows that there is a looming danger to oil investments across the world and Nigeria is not an exception. And, everyone who wants to remain in business will downsize in terms of staff strength and investments cut to stay afloat.

“They (oil firms) have, as a matter of fact, opened discussions with the government through the NNPC on their plan, which included the two I mentioned earlier – slash of staff strength and of investments with marginal profit margin or low return on investment (RoI),” he said.

These plans, which he said would affect non-core staff particularly those at the supporting service units and the contract workers, will definitely happen. “It is just a matter of time after approval of the proposal is granted,” one of the sources said.

The NNPC, in the same vein, is billed to implement a major shake-up today at its management level.

The Corporation had, on Wednesday, expressed its readiness to strategically put in place measures that will alleviate the cost of crude oil production in Nigeria to create market for Nigeria’s crude and make Nigeria a choice destination for Foreign Direct Investment (FDI).

The Group Managing Director of the NNPC, Mele Kyari, made this known at the Central Bank of Nigeria (CBN) Roundtable discussion in Abuja yesterday.

Kyari stated that at the moment, the cost of crude oil production in the country was within the range of $15 to $17 per barrel, adding that some leaders in the Industry, such as Saudi Arabia’s cost of production is between $4 and $5 per barrel.

He noted that due to the uncertainties of the global crude oil market, countries that produce at the cheapest price would remain in the market, while jurisdiction with high cost of crude oil production would not be able to cope with the competing prices.

He noted that due to the Coronavirus pandemic, Nigeria has about 50 cargoes of crude oil that have not found landing, adding that this implies that there are no off-takers for them for now due to the drop in demand.

Source: New Telegraph