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Why oil market uncertainties, COVID-19 will stall projects

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Port Harcourt Refinery

The outbreak of coronavirus and glut in the oil sector will drastically affect the nation’s oil industry, especially projected which are expected to take place this year, the Chairman, International Energy Services (IES) Ltd., Diran Fawibe has said.

Indeed, while the newly sanctioned train seven of the Nigerian LNG is expected to commence with construction work towards third quarter of 2020, Fawibe noted that the current financial crisis in the sector and across the world could delay the project.

Speaking with The Guardian on the implications of the current development, Fawibe stated that the industry has been impeded both locally and internationally.

Already, the Director/CEO of the Department of Petroleum Resources, Sarki Auwalu, stated that conducting bid rounds for marginal fields this year might be unrealistic, considering the state of the global economy.

Auwalu, in a chat with The Guardian, noted that the timing is not right, considering the raging pandemic and equally added that the oil industry is maturing.
According to him, the OPEC presently pegs the country’s production and it will be foolhardy to sell fields to operators when production output is being monitored.

“If you look at this way; we have coronavirus that collapsed the world economy; we have lower prices both of gas and crude; is it wise for a country to bring up an auction for its resources at this time? Even if government want to go ahead with it I will advise that this is not the right time”.

For Fawibe, “The problem we face in the industry is not limited to a particularly country, it is global, especially with operation being reviewed in various countries.

“The collapse of oil price and the diseases are already leading to shutdown of operations and projects in many countries. Few days ago, Exxon-Mobil, which was to undertake the LNG project in Mozambique has decided to suspend the project.

“When you have such suspension, you don’t really know when it is to come back again. That is the kind of situation that may come in other parts of the world, including Nigeria,” he stated.

Fawibe decry the revenue shortfall from the sector and noted that development would leave the country with financial crisis as well as scarcity of foreign exchange, which could post grave challenge after the pandemic.

“It is salutary that government has considered diversification, while engaging tax payer to pay more. When you look at revenue structure, the percentage from oil industry is now a little less. There are contributions from service sector, taxes and the non-oil sector.

“But the area where we will feel the impact the most is in terms of foreign exchange. For many years to come, the petroleum industry will continue to provide foreign exchange and that is where the impact would be felt more.

“Already, the expected reduction in the earning has forced CBN to adjust official rate to N380 against N305 to a dollar. How far they can go in achieving this remained another issue,” Fawibe stated.


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