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Home Industries Company News

Nigeria’s Energy Sector Still Holds Atraction Despite Oil Price Drop

Editor by Editor
August 18, 2015
in Company News
Nigeria’s Energy Sector Still Holds Atraction Despite Oil Price Drop
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Oil prices have surged despite new measures aimed at calming markets worried by the invasion of Ukraine

Oil marginally down on profit-taking but still trades at multi-year highs

  • Despite the plunge in oil prices, investors are still watching the Nigerian oil and gas space with intent following the initiation of some semblance of reforms by Nigeria’s President Buhari.
  • Since coming into power, the President has relieved up to 38 senior officials of the company, spurring some goodwill among Nigerians, and foreign investors.
  • Investors are hoping that the reforms in the sector, starting with the NNPC, could lead to the opening up of the sector, which has been closed to foreign investment due to the tight grip of the government and the uncertainty around the Petroleum Industry Bill. Over the last years, the sector has seen fewer new investments, with fresh funds typically coming in on the back of divestments by IOCs like Shell, Chevron, Total, and Italy’s Eni.

“The Nigerian energy sector is a sector that has been closed to private investment, even though there is interest in that sector notwithstanding of the prices of oil”, Donna Oosthuyse, Director of Capital markets said in a recent interview with BusinessDay.

  • Also, investors are observing the Nigerian oil and gas space, as the effect of lower prices continue to sink the valuations of oil and gas assets.
  • As local players continue to struggle with the headwind of lower prices, weaker businesses could be looking for additional investment to shore up, while the relatively stronger ones could still need more investment to snap up assets to boost their reserves.
  • Last week, global commodity trading firm Gunvor showed interest in the assets of insolvent oil explorer Afren Plc.
  • Further, investments could come in as the state oil company sheds some of weight to become a leaner organization, and as the new management repositions the corporation to become a more prudent and efficient business organization, rather than a bloated civil service.

“It might be difficult to trim the NNPC, especially if they will now handle all imports, but these moves will go a long way to assure investors that we are trying to address the issues, said Dolapo Oni, energy analyst at Ecobank.

  • According to Austin Avuru, CEO of Seplat, in an interview with select journalists, of the 3 major headwinds local independent producers faced in the first half of the year, receivables owed by the state oil firm and its subsidiaries was one of the most significant, coming second only to the plunge in global prices. According to him, about $7 billion was owed to the independents which resulted in consistent cutbacks in work programme over the past five years.

“The cash call problem has been a major hindrance for development”, Avuru said at the time, indicating that the company had receivables due from the Nigeria Petroleum Development Company that was twice its total debt.

Source: Business Day

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Tags: Afren PlcNews ReviewNNPC Nigeria NewsOil & Gasoil pricePower Sector

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