The decline in global demand for Oilfields Services (OFS) has continued to threaten the Nigeria oil industry and, by extension, her economy as a result of low oil prices and COVID-19 pandemic.
The consequences of this are that there may not be serious activities towards big oil discoveries for a long time to come in the country and also those fields that needed to be developed would have to be deferred.
The World Bank says collapse in oil prices coupled with the COVID-19 pandemic is expected to plunge the Nigerian economy into severe economic recession, the worst since the 1980s.
Oil represents more than 80 percent of Nigeria’s exports, 30 percent of its banking-sector credit, and 50 percent of the overall government revenue.
With the drop in oil prices, government revenues are expected to fall from an already low eight percent of GDP in 2019 to a projected five percent in 2020.
Meanwhile, Covid-19 pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance.
Global demand for oilfield services (OFS), measured in the total value of exploration and production (E&P) company purchases, is set for a massive 25 percent yearly drop in 2020 as a result of the Covid-19-caused downturn, which has led to low oil prices
The oilfield equipment and services refers to all products and services associated with the oil and gas exploration and production process, or the upstream energy industry.
“Dividing OFS into six segments – maintenance and operations, well services and commodities, drilling contractors, subsea, EPCI and seismic – only the first three will manage to rise in 2021, while the latter three will have to brace for another year of falling revenues before they can expect improvements,” an industry analyst said.
Nigeria oil and gas industry is heading for a disaster if the price remains low as this would mean there would not be any reserve addition to the country’s oil reserve for a long time to come, industry stakeholders have said.
The demand for oilfield services has declined terribly to the extent that a good number of oil rigs contracts have been deferred, many contracts canceled or deferred and no major projects are on sight except the Nigeria Liquefied Natural Gas train 7 project.
Okorafor Bank-Anthony, immediate past president of Petroleum Technology Association of Nigeria (PETAN) said he feared that Nigeria oil and gas industry was headed for disaster because nobody wanted to invest at the moment because of low oil prices and COVID-19.
“You cannot grow reserve when the exploration budget has been cut. Everything goes with low oil prices,” He said.
In the same vein, Abiodun Adesaya, managing director of Degeconek Nigeria Limited, said that the development in Nigeria was a reflection of global situation with the industry. He said exploration would not happen because of this but operating companies would only concentrate on production aspect of upstream to keep the industry going
Global demand OFS, measured in the total value of E&P company purchases, are set for a massive 25percent yearly drop in 2020 as a result of the Covid-19-caused downturn, a Rystad Energy analysis shows. Spending is expected at $481 billion this year and takes the first step on the road to recovery in 2021, when it is forecast to tick up by just about 2 percent
The recovery will accelerate further in 2022 and 2023, with OFS spending by E&Ps reaching some $552 billion and $620 billion, respectively. Despite the boost, purchases will not return to the pre-Covid-19 levels of $639 billion achieved in 2019.
Source: Business Day