NNPC Directs Oil Companies to Reduce Operating Costs by 50%

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SWITZERLAND, MAY 08 – In a reaction to the oil price downturn occasioned by the COVID-19 pandemic, the Nigerian National Petroleum Corporation (NNPC) has directed oil companies in Nigeria to reduce their operating costs by 50 per cent.

This was discussed at a webinar organised by the CWC group dubbed “Strategies to Navigate Nigeria’s Oil and Gas Business through the Global Pandemic” monitored by Today’s Echo on Wednesday.

Top experts that participated in the event included: Bismarck Jemide Rewane, top Nigerian Economist and Chief Executive Officer of Financial Derivatives, Ainojie Alex Irune, Chief Operating Officer, Oando Energy Resources, Oluwatoyin Aina, Group Head, Energy Downstream & International Oil Trading, First Bank of Nigeria, Ade Adeola, Managing Director, Energy & Natural Resources, Standard Chartered Bank Plc, and Seyi Bella, Partner, Banwo and Ighodalo.

The oil downturn has been especially harsh on indigenous oil producers with many struggling to meet up with their obligations to lenders. This has led to production cuts while some producers may even be forced to shut down production, with a tragic loss of thousands of jobs.

The experts harped on the need to go back to the drawing board to re-strategise ways that the oil firms can properly navigate through these trying times.

Due to the present problems, the international oil and gas industry has seen a lot of reduction in Final Investment Decisions (FIDs) with capital is also being reallocated to mitigate the impact of the oil price downturn

Furthermore, a number of projects are being reviewed, or cancelled across Africa.

To mitigate the impact of the downturn, the experts recommend that Indigenous players focus on reassessing the values of the assets they want to acquire as some of those assets were overpriced.

Other recommendations include sharing of assets, and diversification of debt portfolio to include venture capitalists in addition to loans from banks.

They also advised the oil firms and their banks to work together to re-evaluate some of their major agreements in a way that benefits both parties. These may include renegotiation on terms such as extension of tenure and moratorium on financial facilities.

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