Indigenous oil and gas companies are among the operators in the country worst hit by the sharp drop in oil prices and demand, with many now struggling to stay afloat.
The international oil price benchmark, Brent crude, which rose to as high as $70 per barrel in January slumped to as low as $15.98 per barrel last week. It traded around $21 per barrel on Wednesday last week.
“The oil and gas is a long-term business; in 2014/2015, we went through a dip. This current dip is large, deeper and even more impactful,” the Chairman, Independent Petroleum Producers Group, Mr Ademola Adeyemi-Bero, said.
The IPPG is an association of indigenous exploration and production companies, with a current membership of 26 companies.
Adeyemi-Bero said the independent producers and the Nigerian National Petroleum Corporation had joined forces to “look at what we need to do differently.”
“We must make sure that our oil is competitive in the marketplace. What we have to focus on is lower the costs as best as we can and that is what we are doing,” he added.
He said the current downturn in the industry would surely pass, urging operators to keep their eyes on the long term.
He, however, said, “One thing that is clear is that over the next six to 12 months, maybe even 18 months, the oil price may not be at the position we want it to be. But even at $20-$25, we must do certain things. We must cut our costs; that is just a natural business requirement.”
The rout has been bad for all the country’s producers but the pain has been particularly acute for the independent producers who mostly acquired assets about six years ago.
Unlike oil majors operating in the country, whose average cost of producing is about $22 per barrel, these companies need between $35 and $40 per barrel if they are to stay in business, according to Bloomberg.
“As with all operators, it has affected our revenue projections considerably. However, we are working aggressively on cost optimisation initiatives to mitigate the challenge of reduced cost of oil,” the Chief Executive Officer, Eroton Exploration & Production Company, Mr Ebiaho Emafo, was quoted as saying.
