Oil firms to cut 2015 budget by $200bn
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FROM ADEWALE SANYAOLU, ABUJA
Worried by the continuous decline in oil prices, about 116 oil companies across the globe may have concluded plans to slash their 2015 budgets by about $200 billion, Minister of Petroleum Resources, Mrs. Diezani Alison-Maduke, has said.
The Minister stated this in her address at the 15th Nigeria Oil and Gas (NOG) conference titled, ‘‘State of the Industry: Achievements and Future Direction” in Abuja yesterday.
The Minister lamented that globally, oil prices have been sliding to levels last seen during the peak of the financial crisis in 2008, resulting from a weak global economy, and strong dollar as well as an over supplied oil market. The Minister who premised the $200 budget cut figure on Wood Mackenzie, said relative to 2014, a total of $120 billion (24 per cent) has been cut from the 2015 upstream budgets of some 116 companies, adding that this can go to as much as 40 per cent.
‘‘Most analysts agree that as oil producers, we should brace up for extended periods of lower prices and increased price volatility. The resultant effect is that companies are slashing capital spending in 2015 as a response to this dramatic collapse in oil prices,’’ she lamented.
On the state of the industry, she admitted that it was obvious that many oil producing countries, including Nigeria, are facing declining government revenues due to low oil prices posing challenges to funding of projects, adding that the state of the industry is one that is responding to the dramatic events.
Represented by the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mr. Joseph Dahwa, the Minister said in the Nigeria upstream sector, there is a renewed impetus to managing cost, compressing contracting cycles, vigorously addressing the menace of pipeline vandalism and associated crude oil theft as well as the pursuit of the passage of the Petroleum Industry Bill (PIB).
In the midstream, she explained that new gas pipelines are being constructed in furtherance of government’s gas development initiatives, adding that the oil product pipeline is being rehabilitated whereby critical segments that were once not in use are now operational.
Also in the downstream sector, she stated that products supply and availability has been sustained with NNPC’s retail network continuing to expand to improve product availability.
However, she said all of these accomplishments are now being challenged by the current low oil price environment, which is characterised by dramatic revenue declines, hinting that flexibility in capital expenditure and funding in general would be further constrained in 2015.
On the outlook, Alison-Madueke stated that the persistent depressed oil prices may limit industry scope to maneuver in growing long term production and reaching the target of 4.0 million barrels of oil per day.
‘‘Under a sustained low oil price, industry must challenge itself to raise funding for projects to meet these targets. This will call for radical/project management and innovative financing mechanism,’’ she advised.
Worried by the continuous decline in oil prices, about 116 oil companies across the globe may have concluded plans to slash their 2015 budgets by about $200 billion, Minister of Petroleum Resources, Mrs. Diezani Alison-Maduke, has said.
The Minister stated this in her address at the 15th Nigeria Oil and Gas (NOG) conference titled, ‘‘State of the Industry: Achievements and Future Direction” in Abuja yesterday.
The Minister lamented that globally, oil prices have been sliding to levels last seen during the peak of the financial crisis in 2008, resulting from a weak global economy, and strong dollar as well as an over supplied oil market. The Minister who premised the $200 budget cut figure on Wood Mackenzie, said relative to 2014, a total of $120 billion (24 per cent) has been cut from the 2015 upstream budgets of some 116 companies, adding that this can go to as much as 40 per cent.
‘‘Most analysts agree that as oil producers, we should brace up for extended periods of lower prices and increased price volatility. The resultant effect is that companies are slashing capital spending in 2015 as a response to this dramatic collapse in oil prices,’’ she lamented.
On the state of the industry, she admitted that it was obvious that many oil producing countries, including Nigeria, are facing declining government revenues due to low oil prices posing challenges to funding of projects, adding that the state of the industry is one that is responding to the dramatic events.
Represented by the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mr. Joseph Dahwa, the Minister said in the Nigeria upstream sector, there is a renewed impetus to managing cost, compressing contracting cycles, vigorously addressing the menace of pipeline vandalism and associated crude oil theft as well as the pursuit of the passage of the Petroleum Industry Bill (PIB).
In the midstream, she explained that new gas pipelines are being constructed in furtherance of government’s gas development initiatives, adding that the oil product pipeline is being rehabilitated whereby critical segments that were once not in use are now operational.
Also in the downstream sector, she stated that products supply and availability has been sustained with NNPC’s retail network continuing to expand to improve product availability.
However, she said all of these accomplishments are now being challenged by the current low oil price environment, which is characterised by dramatic revenue declines, hinting that flexibility in capital expenditure and funding in general would be further constrained in 2015.
On the outlook, Alison-Madueke stated that the persistent depressed oil prices may limit industry scope to maneuver in growing long term production and reaching the target of 4.0 million barrels of oil per day.
‘‘Under a sustained low oil price, industry must challenge itself to raise funding for projects to meet these targets. This will call for radical/project management and innovative financing mechanism,’’ she advised.
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