COVID-19: Stakeholders urge FG on measures to safeguard economy

Stakeholders in the Nigerian oil and gas sector have called on the federal government to engage in proactive measures to save its economy from shock as the world battles the negative effect of the COVID19 and dwindling oil prices.

This was agreed upon at a monthly webinar organised by the Nigerian Association of Petroleum Explorationists (NAPE) with the theme “New Normal: Post COVID-19 for the Nigerian Oil and Gas sector.”

During the live session which featured experts such as Chief Executive Officer, Seplat Petroleum Development Company Plc (SEPLAT), Dr Austin Avuru, the current health crisis has confirmed that no economy, especially the oil-reliant ones are not spared from financial shocks, hence the urgent need to diversify to battle against poverty and inequality.

While speaking, Avuru said current realities had shown that oil revenue was trending downwards below 45 per cent as a percentage of total federal revenue for 2020.

According to him, “this is unlike in the past where revenue from oil accounted for 80 percent of federal revenue and 92 per cent of foreign exchange.”

The SEPLAT boss noted that there had been price shocks in the past, including the recent one in 2016 where crude oil price went as low as $26 per barrel before it rebounded.

“However, this is different because this time around we have a combination of a surprise shock with unprecedented demand drop and a global economic meltdown.

“This time, because there was a global pandemic that led to a global economic meltdown, some 25 million barrels per day of demand was cut out. It also came at a time when there was a struggle for market between the shale producers in the United States on one hand and Russia and Saudi Arabia on the other hand that led to supply shock.

“So we had an unprecedented situation where prices actually went negative even though it was just for a few hours. We are looking toward a new normal of very low oil prices, somewhere between $40 and $50 per barrel. We will be lucky if it gets to $60,”Avuru said

It was noted that within the last five years, investment in the oil and gas sector has been drying up, this collaborates with the recent report by the International Energy Agency, that the Covid-19 pandemic has set in motion the largest drop in global energy investment in history, with spending expected to plunge in every major sector in the year, from fossil fuels to renewables and efficiency.

Also, the agency said that the unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions. Thus, global investment is now expected to plummet by 20 percent, or almost $400 billion, compared with last year.

Avuru noted that there had been price shocks in the past, including the recent one in 2016 where crude oil price went as low as $26 per barrel before it rebounded.

“However, this is different because this time around we have a combination of a surprise shock with unprecedented demand drop and a global economic meltdown.

“This time, because there was a global pandemic that led to a global economic meltdown, some 25 million barrels per day of demand was cut out.” It also came at a time when there was a struggle for the market between the shale producers in the United States on one hand and Russia and Saudi Arabia on the other hand that led to supply shock.

“So we had an unprecedented situation where prices actually went negative even though it was just for a few hours. We are looking toward a new normal of very low oil prices, somewhere between $40 and $50 per barrel. We will be lucky if it gets to $60,” Avuru said.

He said according to projections, it would be difficult for oil prices to rise to what Nigeria and other countries used to know, as there was also competition from Shale and other renewable sources of energy.

He said the economic readjustment should be focused on gas as enabler for domestic energy security and catalyst for industrial growth, minerals, mining, and agriculture as additional Forex earners.

Avuru also urged operators in the oil and gas sector to explore various ways to transform their portfolios in order to stay afloat during these critical times.

He said “There has to be regional market capture. So the refineries and petrochemical plants like Dangote have to target the entire West African region for selling of their products.

“Those of us who are in the gas business should take advantage of the West African Gas Pipeline with the hope to deliver the gas that will power the entire region.

“The same thing with Liquefied Petroleum Gas, all of these regional markets we now have to capture, as part of our survival strategy.”

He called on the federal government to intensify effort to pass the PIGB, ensure that the bill takes into cognisance the realities of the time, and make policies that will revitalise the economy.

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