Austin Avuru, chief executive officer of Seplat Petroleum Development Company Plc, has said they expect a new normal of very low oil prices, somewhere between $40 to $50 per barrel. We will be lucky if it gets to $60.
The current situation is unlike in the past where revenue from oil accounted for 80 per cent of federal revenue and 92 per cent of foreign exchange, he pointed out.
For this, he said Nigeria must reset its economic landscape due to the crash in global crude oil prices.
The economic resetting, he said, should be focused on gas as an enabler for domestic energy security and catalyst for industrial growth, minerals, mining and agriculture as additional Forex earners.
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He said this has become necessary in view of the fact that current realities on the ground have shown that oil revenue was trending downwards below 45 per cent as a percentage of total federal revenue for 2020 and the fact that the national economy must remain afloat for the benefit of all.
This is the only way the economy can survive the twin problems of crashing oil prices and the global economic meltdown that are taking their tolls on the Nigerian economy.
The Seplat boss also said that all the bills in respect of the oil and gas sector that are currently either with National Assembly or the executive should be fine-tuned to create efficiency, vibrancy in the system and not just targeted at getting more revenues for the government. He said failure to do this may scare investors away from the industry in the nearest future.
“Vibrancy must be encouraged in the system through regulatory and governance framework while attention should also be paid to domestic investments in order to bail the country out the current economic doldrums,” he said.
Avuru spoke at on Wednesday at a webinar organised by the Nigerian Association of Petroleum Explorationists (NAPE) and 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 there is a combination of a surprise shock with unprecedented demand drop and a global economic meltdown.
This time, he said, because there is a global pandemic that has led to a global economic meltdown, some 25 million barrels per day of demand has been cut out.
Unfortunately, according to him, this happened 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.
He stated that 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.
This situation, he stated has made it imperative for the Nigerian government to intensify efforts to diversify the nation’s economy.
He 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 said.
