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Why should Nigerian oil and gas industry undergo serious changes?

What are the main problems, which Nigerian oil and gas industry can face? What are the changes in this sphere of economics, according to the experts? Read the article to learn the main points of oil and gas development.

Nigerian oil and gas industry report

Nigerian oil and gas industry report

Reduction of price of oil led to reduced activity level on the African continent and exerted impact on the countries, which traditionally depend on the oil and gas revenue. Despite such problems, Africa still offers considerable opportunities in oil and gas sector. ‘Regional authorities can attract oil and gas investors to transform their regulating, financial and licensing systems. Now it is a high time for this purpose’ – Chris Bredenhann, PwC Africa Oil & Gas Advisory Leader declared. He said that for the industry, it is also important to forget for a while the problems caused by reduced prices and to consider other forces, which create the industrial sector. Our company considers that demand for innovations in technologies will grow along with cost reduction in the industry. Besides, it can be ideal time for theNigerian oil and gas industry to consider training programs for increase in upskill of level and standards of the company to give to local candidates chance to become participants of this industry when it gains popularity again. Now the staff of the oil-extracting company analyzes what occurred in Nigerian oil and gas industry in the largest African markets for last 12 months. As well as last year, Africa has a basic income of natural gas of 496.7 trillion cubic feet (Tcf). It constitutes 90% of production of natural gas of the continent arriving from Nigeria, Libya, Algeria and Egypt.

the Nigerian oil and gas industry

Nigeria oil and gas industry analysis

According to experts, the main problems in the oil and gas industry in Nigeria remained constants in comparison with previous years. The uncertainty in the regulating bases, corruption/ethics, bad infrastructure and lack of professional resources became the reason of it. This year there was also essential increase in problem of observance of requirements of the taxation, also a situation with government relations. Such uncertainty remained the main problem of many oil and gas companies in Africa. The third year in a row 70% of the organizations call it one of five biggest problems, which they have ever had.

For the first time a series of annual reviews of PwC began in 2010 when they called 6 main problems. Within all continents, many organizations experienced the government sanction and difficulties in case of implementation of new projects. Special difficulties are observed in new areas of hydrocarbon, such as Mozambique because the government not completely understands the scale of oil and gas projects. As a result, organizations begin to unite with the government to provide a guarantee of strategic and supporting partnership. They determined an oil price and natural gas as the most significant factor, which companies mention within the next three years. It is expected that the price would reach 52 US dollars by the end of 2016, 60 US dollars by the end of 2017 and 69 US dollars by the end of 2018. The companies were concentrated on increase in efficiency and cost reduction.

Nigerian oil and gas industry

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Observance of established requirements remains a considerable problem for the organizations this year. Variability of foreign currency is also estimated as a probable factor of business impact within the next three years. This year there were big fluctuations of level of currencies. Asset management and optimization remain key strategic area for the companies. ‘Fortunately, the industry remains optimistical, and many specialists in research and production of oil and gas are concentrated on finding new resources within three years and expect oil price increase’.

Though there was some recovery in the price environment, investors’ confidence remains low, as considerable recovery apparently isn't expected, and the basic oil principles of the market still decrease. The low price of oil forced operators to defer FIDs (final investment decisions) on more than for 300 billion US dollars. In a type of the current situation oil and gas, companies hope to invest the capital in many key areas to stimulate growth for following three or five years. The increased efficiency estimated as the highest is followed by local content, professional development and improvements of infrastructure. ‘The oil and gas industry faces higher barrier because the technology and workplaces usually are highly specialized and expensive’.

Nigeria oil and gas industry analysis

Stability of the industry will be also affected by many drivers. They are connected with fuel prices, appearance of new competitors, ecological consequences of the industry and a legislative framework. The main and also technological infrastructure is important for the oil and gas industry to prosper. Twenty percent of the organizations think that discrepancy of the main infrastructure will exert considerable impact on their business for the next three years. 73% of percent are sure of it. In the same way, 20% of respondents expect that the technology will exert considerable impact on their business for the next three years, but only 3.43% of respondents estimated this infrastructure as strategic area of the center for the same period.

The uncertain regulatory base is one of the main questions against which the organizations in the oil and gas industry fight. However, Minerals and the Oil law on development of Resources (MPRDA) weren't changed and approved yet, and can't make any modifications. In Tanzania, the regulating environment remains doubtful despite promulgation of the Oil law in 2015. Besides Nigerian government didn't transfer Petroleum Industry Bill to the law.

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