Africa Press-Nigeria:<\/p>\n
Oil companies in Nigeria have instructed contractors to cut their rates by almost half as the industry responds to the dramatic slump in crude prices.<\/p>\n
State-owned Nigerian National Petroleum Corp. has told producers \u201cto take immediate steps to reduce our operating costs, budgets and re-negotiate our contracts downward by 40% in the face of this adverse situation,\u201d Total SA\u2019s Nigerian unit said in a letter to its service providers on April 2.<\/p>\n
Oil prices are near 18-year lows as the coronavirus pandemic wipes out global demand and a price war between Saudi Arabia and Russia, which ended over the weekend, brings a wave of unwanted crude to the market this month. Brent, the international benchmark is currently trading around $28 a barrel, after reaching near $70 a barrel in January.<\/p>\n
Confirming the letter, Total said in a statement that given the current economic environment, it will \u201chave ongoing discussion with all our contractors in Nigeria on the subject of cost reductions.\u201d<\/p>\n
\u201cThe outlook remains acutely gloomy and the trend is forecast to continue in this trajectory for the foreseeable future,\u201d according to the letter.<\/p>\n
Majors including Royal Dutch Shell Plc, Chevron Corp. and Total pump most of the country\u2019s oil through joint ventures and production sharing contracts with NNPC.<\/p>\n
The French oil giant asked its contractors in Africa\u2019s biggest crude producer \u201cto show understanding and cooperation in our effort to ensure cost optimization for the survival and sustenance of current and future mutual business interests.\u201d<\/p>\n
Exxon said in a statement that, while it won\u2019t comment on third parties\u2019 business, it is \u201clooking to significantly reduce spending as a result of market conditions\u201d caused by the coronavirus pandemic and \u201cis evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term.\u201d<\/p>\n
A spokesman for Chevron said it is working with the NNPC and other partners \u201cto explore ways of reducing costs in the current price environment to sustain our business.\u201d<\/p>\n
The NNPC is working with its \u201cupstream partners both in the JVs and PSCs to review their work program and budget to levels which can be supported by the low crude oil price environment,\u201d said Bala Wunti, group general manager of the state company\u2019s subsidiary that manages its investments in the upstream oil and gas sector. \u201cOur objective is to achieve a reasonable outcome for all stakeholders that can guarantee a sustainable future for the industry.\u201d<\/p>\n
Nigerian-owned oil services companies have significantly increased their share of contracts in the last decade since the country introduced a law to boost local participation in the sector.<\/p>\n
Margins of these businesses are being hit simultaneously by producers\u2019 belt tightening and additional costs generated by lockdowns imposed by governors of some oil-producing states, according to Bolu Odusanya, managing director of TREXM Oil & Gas Services Nigeria Ltd. \u201cWe are getting squeezed on both sides,\u201d he said. \u201cCosts are going up and clients are trying to renegotiate all contracts.\u201d<\/p>\n
Total requested that its contractors accept the 40% reduction from April 9 \u201cwithout compromising\u201d on service quality, the letter said.<\/p>\n","protected":false},"excerpt":{"rendered":"
Africa Press-Nigeria: Oil companies in Nigeria have instructed contractors to cut their rates by almost half as the industry responds to the dramatic slump in crude prices. State-owned Nigerian National Petroleum Corp. has told producers \u201cto take immediate steps to reduce our operating costs, budgets and re-negotiate our contracts downward by 40% in the face […]<\/p>\n","protected":false},"author":62,"featured_media":20028,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,14],"tags":[434,228],"class_list":["post-24023","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-policy","tag-nnpc","tag-oil-production"],"yoast_head":"\n