Local content faces new threat as oil price hovers at $59 per barrel

 Local content faces new threat as oil price hovers at $59 per barrel

Stakeholders in Nigeria’s oil and gas industry were pleased in October, when crude oil price rose from $70.00 to $85.00 per barrel for a reason. The rise in the price of oil was expected to boost investment, and by extension, local content development in the industry through improved funding of projects. The improved funding was also expected to culminate in award of new contracts and settlement of debts owed local contractors and others in the industry.But the expectation was short-lived as the price soon dropped to $75.00, before sliding further to the current $59 per barrel. The relatively low price which is partly fuelled by excess supply has started to impact negatively on local content development, especially as operators found it difficult to do major projects and programmes. Investigation showed that many indigenous operators, including service providers found it difficult to survive mainly as a result of low patronage by the majors, including the International Oil Companies (IOCs) and independents. In a recent interview with Sweetcrude, the chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Bank-Anthony Okoroafor, said: “Oil is now under $60 a barrel, a drop of about one third which is as a result of excess supply in the USA (boom in shale supply), surge in Saudi and Russia supply and Chinese oil inventories rising quite significantly. We are barely walking a tight rope.” Before then, Okoroafor had said in another interview: “The major problems in the nation’s oil and gas industry are many. For instance, there are very limited activities or jobs to keep service companies actively engaged. This is mainly as a result of the delay in passing PIB into law. There is insecurity. There is also corruption and lack of transparency which need to be addressed.”
Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC), has concluded plans to meet in Vienna, Austria, this week in order to review the market as well as adopt measures that could assist in achieving market stability. Many members, including Nigeria and Saudi Arabia have expressed commitment to achieving stability. The Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al-Falih who visited Nigeria last week said: “As we meet in a week’s time, our focus again will be on fundamentals of supply, demand and inventories and trying to bring that back to a level that will show the market that we have been talking about. American producers as well, who are quite troubled today as they prepare for their 2019 budget about continuous building inventories and lack of clarity on where the market is going in 2019.
However, hope is not completely lost as stakeholders have concluded plans to review and adopt measures, capable of enhancing local content development at the 8th Practical Nigerian Content forum in Yenagoa, Bayelsa State from December 3-6, 2018. The Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Mr. Simbi Wabote has called on indigenous companies in the industry to get their companies quoted in the stock market in order to attract adequate funds for expansion. He said listing on the stock market would change the operating model of the oil and gas industry and enable the pooling of funds for growth, empowerment and inclusion of Nigerians in the activities of the sector.

Ayomide Oyewole

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