These are indeed trying times for the global oil and gas industry, but the current context also presents a great opportunity for change.
Opportunity to take a whole new evaluation at the way West African countries are doing things, with a view to being more efficient and innovative.
Governments are facing gross revenue shortages and sometimes experiencing difficulties meeting their joint venture funding obligations.
Crude oil data obtained from the National Bureau of Statistics (NBS) in Nigeria revealed that foreign investment inflow into the oil sector in Nigeria dropped further by $178.42 million, about N35.684 billion in one year, from December 2014 to December 2015.
Specifically, the NBS in its Capital Importation Report for the Third and Fourth Quarters (Q3&Q4) 2015, pointed out that foreign investment inflow into the sector crashed to $29.78million, about N5.95 billion as at the end of 2015, compared to $208.18 billion in 2014, representing a decline of 85.7 percent.
West Africa as a prolific long term oil and gas region has a developing industry and infrastructure, a skilled industry workforce and extensive local capacities.
Efficient management of costs is, as a consequence, a critical element. Cost efficiency with the fall in oil price and investment decisions come under further scrutiny by all stakeholders, who focus increasingly on value and profitability while maintaining the capacity to accommodate future recovery.
The Managing Director, TOTAL Exploration and Production Nigeria Limited, Nicholas Terraz said recently that the oil price fall is responsible for the challenging economic environment in Nigeria. “Throughout 2015, we faced a challenging economic environment, due to the sharp fall in the price of oil. This environment requires us to adapt and quickly take actions, whilst at the same time preparing for the future when the market situation will improve again.”
Further analysis revealed that in Q1 2015, foreign investment inflow into the petroleum industry of the Nigerian economy stood at $9.47 million, compared to $201.14 million in Q1 2014. In the second, third and fourth quarters of 2014, capital imported into the oil and gas sector stood at $4.86 million, $2.21 million and $13.22 million respectively, against $3.83 million, $3.16 million and $0.05 million recorded in the corresponding periods in 2015.
According to NBS, despite these trends, United Kingdom (UK) and the United States remain the first and second largest providers of capital investment for Nigeria, as they have been each year since 2007.
To further stabilize investors’ confidence, there is a need to ensure attractiveness and respect of the contractual and fiscal terms, countries would have to lay a solid foundation for a sustainable future through effective management of costs, efficient safety measures and encouragement of foreign investment inflow into the sector.