The drop in global oil prices has inflicted massive pain on oil exporting countries, widening budget deficits and weakening currencies. Other than Nigeria’s plummeting finances, oil companies in the country’s oil and gas sector, as is the case with oil producers worldwide, have been forced to scale down on investments, slash their budgets and lay off staff as plunging oil prices takes a toll on crude oil exporting countries and industry operators.
Brent crude has more than halved since June last year, with the slide accelerating after the Organisation of Petroleum Exporting Countries’ (OPEC) decision last November not to cut output, despite a US supply glut and weaker than expected demand in Asia.
Brent sold at $45.54 Tuesday afternoon, down 20 cents but still some way from its 2015 low of $45.19, while US crude futures hit an intraday low of $41.43 – close to their lowest since early 2009 – before picking up when they traded at yesterday’s close price of $41.87 a barrel.
A report by the London-based Financial Times (FT) yesterday also showed that for smaller oil firms, better known as independents, to survive, a new wave of industry consolidation is inevitable, as they struggle to remain afloat. According to FT, dozens of small oil companies are limping along, labouring under heavy debts and dwindling cash flows.
The low oil price is already reshaping the industry landscape: it drove Royal Dutch Shell’s $55 billion takeover of smaller rival BG Group, and triggered the fall of Nigeria-focused oil explorer Afren, which entered administration last month. More consolidations are therefore expected to occur in the coming months if oil prices continue to plunge further south.
