The steep drop in crude oil prices have put most Nigerian oil companies at risk, with industry experts saying oilfield shutdowns and job losses are imminent.
The global oil benchmark, Brent crude, fell on Wednesday to as low as $15.98 per barrel, its lowest since June 1999, before rising to $20.87 per barrel as of 6.45pm Nigerian time.
The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, last month, put the cost of crude oil production in the country within the range of $15 to $17 per barrel.
He said countries producing at the cheapest price would remain in the market while those with high cost of crude oil production would not be able to cope with the competing prices.
“There is so much oil floating around in tankers that people can pick and choose, and ask for all sorts of discounts. This has serious repercussions for a country like Nigeria. Unfortunately for us, we are in a very nasty situation,” an energy expert and former board member of the NNPC, Alhaji Abdullahi Bukar, said.
Bukar, in a telephone interview with our correspondent on Wednesday, said at the current oil price, some Nigerian firms “are already losing money”.
He said, “There have to be massive cuts in operating costs, and that will also mean that nobody will be investing in new production.
“A lot of companies will be stressed because where the unit operating costs higher than the selling price, then you are selling at a loss. No one wants to be in that position; so you should actually stop production until things have improved.”
Bukar said some companies might shut the more expensive fields and leave the ones producing at “reasonably low-operating costs” to continue production.
The Chief Executive Officer of International Energy Services Limited, Dr Diran Fawibe, said the security cost and other charges imposed on operators had made the production cost in the country very high.
“So, in order to sustain that production level, the price must be high enough. We may see quite a number of projects being suspended, if not outright cancelled, until the price has gone up to a level where they can justify the economies,” he said.
He said the oil services companies would be badly affected by the suspension of projects, adding that quite a number of people would lose their jobs.
The President, Nigerian Association of Petroleum Explorationists, Mr Alex Tarka, told our correspondent recently that rates for oil rigs were already being renegotiated downwards.