Oil industry to face tough challenges as economy contracts

 

A financial Analyst has said that the nation’s oil and gas industry is likely to witness a lot of challenges in the future as the non performing loans in the sector will be on the increase, due to the contraction of the economy, reduction in production level.

Principal Consultants, DRNL Consult Limited, Ms Ronke Onadeko who made this statement in Lagos while responding to questions after virtual training organised by FOSTER in partnership with Finance Correspondent Association of Nigeria (FICAN) said that the sector will likely see shutting down of fields, low profit margins and in some cases losses.

In her explanation she said  “many companies invested in oil fields when barrel prices were above $100/bbl and now is as low as $15/bbl. The industry will see a lot of challenges but they will improve and efficiencies will also improve in the long term”

Commenting on the impact of the petroleum income tax on the oil and gas sector, she said downstream sector has been used as cash cow for politics for many years and the inefficiencies have been exploited, adding that deregulation of the sector will help to block all source of leakages in the industry and It could be disadvantageous to the political class. 

She further said that the three quickest things the government needs to do to avert another economy recession is to Pass the PIB, use gas for power, gas for industry, gas for fuel and gas as an input and feedstock into petrochemical plants.

She said that fund options for expansion of the oil sector could come from Local commercial banks,  Capital markets, Venture capital, International banks, Bilateral and multilateral agencies and other funds that will come in from mergers, acquisitions, collaborations etc 

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