Consumption of petroleum products will go down and competition will get stiffer just as pressure is expected on earnings because of the current recession according to oil and gas operators.
At the same time in the upstream of the industry, it is expected that more projects would be put on hold and that is if they are not cancelled out rightly.
The operators stated that since the economy is not growing, companies and individuals that consume petroleum products would be negatively affected. Their demand for the product would shrink.
Tunji Oyabanji, managing director of 11 plc stated the situation would be tough for downstream subsector as competition would be stiffer. He said, unfortunately, the oil and the gas industry has been in a kind of recession with the advent of COVID19, stating further that the business operating environment would get worse.
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Also speaking the managing director of Energy and Mineral Resources, Abiola Ajayi, said, the country is witnessing the second recession in 5 years largely on account of low oil prices from demand flattening due to COVID19 pandemic.
“The impact on the industry is severely scaled-down production to try and shore up prices, previous plans and budgets are thrown out of the door, lower investment, staff layoffs, cancelled development projects creating long term uncertainly for the industry”.
He said incidentally mineral prices are at their peak prices– gold, platinum, lithium as if giving credence to the long term frailty of d oil industry
“You must have also noticed massive divestment by majors- BP, Shell, Exxon, and investment in renewable and countries in Europe setting time limits for the sale of petrol-driven vehicles within d next 10 years”, he said
For the downstream, margins would even be lower on demand pressures, but in Nigeria with the new policy of full deregulation, we would experience fully the price fluctuations from various nuances in the market– vaccine announcement, production curtailment announcements, and countries not adhering to an agreed production quota.
The Nigerian Bureau of Statistic (NBS) in its report released on Friday said the Nigerian Gross Domestic Product (GDP) contracted by 3.62 percent year on year in real terms in the third quarter of 2020.
On the oil sector, it said that the average daily oil production recorded in the third quarter of 2020 stood at 1.67 million barrels per day (mbpd), or 0.37mbpd lower than the average production recorded in the same quarter of 2019 and 0.14mbpd lower than production volume recorded in the second quarter of 2020.
It added that real growth for the oil sector was –13.89 percent (year-on-year) in Q3 2020, indicating a sharp contraction of –20.38 percent relative to the rate recorded in the corresponding quarter of 2019.
Furthermore, real oil growth decreased by –7.26 percent when compared with oil sector the growth recorded in Q2 2020 which was 6.63 percent.
“Quarter on quarter, however, the oil sector recorded a growth rate of 9.64 percent in Q3 2020.
“The sector contributed 8.73 percent to total real GDP in Q3 2020, down from 9.77 percent and 8.93 percent respectively recorded in the corresponding period of 2019 and the preceding quarter, Q2 2020.”
