Nigeria’s petroleum sector has not enjoyed the best of times recently and the outlook going forward is not the best. The country’s production has dropped by 25% in 2016 due to a plethora of reasons. These reasons were x-rayed and supported in a document released by Fitch recently, Reuters reports. The document is entitled ‘Oil & Gas Sector: Challenges from The Fall in Energy Prices.
The document highlighted the following problems plaguing the country’s sector and its impact on oil and gas firms. These are the problems as highlighted by the agency.
- Infrastructural constrains continue to inhibit the country’s output and efficiency of production
- The long-overdue Petroleum Industry Bill, a cornerstone of President Buhari’s oil sector reform, is still far from final and there is no realistic target date in sight for its passage and implementation
- Security issues in the Niger-Delta continue to hamper the production drive of the Federal Government (FG)
- The multi-billion crude-for-loans prepayment deals with India and China are not likely to reach the announced targets
- The low use of natural gas hamper the oil & gas sector and without developing domestic refining and natural gas capabilities, Nigerian oil and gas companies remain exposed to oil price fluctuations, thus capping their ratings.
- Nigeria’s inability to refine its crude oil but rather continues its dependence on oil product imports stifles development in the sector.
While the ratings agency pointed out these problems, it also saw positive points that could signify potential growth of the sector.
- Nigeria has a healthy proved reserve life of 43 years, which is quite significant
- Nigeria’s recent ‘Seven Big Wins’ programme, which covers sector regulation, upstream and downstream projects, security, as well as transparency and corporate governance is seen as a step in the right direction
- Nigeria’s reported $5 billion settlement with western oil majors to cover their exploration and production costs since 2010 is another positive step.
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