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Liquidity, bankruptcy crisis hits  oil industry Service providers battle E&P over unpaid debt Mass resignation of CEOs •No fund for new investment

President Muhammadu Buhari and Minister of state for Petroleum, Ibe Kachiku

By Samuel Ibiyemi

There are indications of liquidity crisis and bankruptcy in the Nigerian oil and gas industry due to huge figure of about N4.2 trillion  unpaid debt owed  service providers by multinationals and indigenous  exploration and production (E&P) firms operating in the upstream and downstream sectors. The development has forced some banks to receiver and appoint manager to liquidate  some oil firms including oil service providers, E&P firms and downstream operators. This includes,  Seawolf, Lister Oil, Eland Oil& Gas and GT Bank and  Italian oil firm  Petrolog is also in crisis. Hence, the Asset Management Company of Nigeria (AMCON) has offered properties of certain oil companies such as Lister Oil was seized by First bank of Nigeria over N7.2 billion, and Seawolf Oil Field among others.

President Muhammadu Buhari and Minister of state for Petroleum, Ibe Kachiku

President Muhammadu Buhari and Minister of state for Petroleum, Ibe Kachiku

To avoid embarrassment of creditors and inability of companies to pay salaries of staff, some of the Chief Executive Officers  have  resigned. One of them is the Chief Executive Officer of  Eland Oil and Gas, Les Blair

At the same time, industry analysts have expressed state of confusion over future of oil prices globally.

Industry sources revealed that multinationals have not been able to settle contractors for jobs executed despite the introduction of alternative funding scheme by the Minister of State for Petroleum and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC). Equally, debt owed financial institutions by  indigenous E&P firms has made it practically impossible for them to make fresh investment that will enable them to take advantage of the reduction in prices of contract fees and  facilities for lease.

The misfortune of indigenous firms in particular was based on failure of oil price forecast  by analysts both in the public and private sectors. Besides  International Monetary Fund (IMF),  most of the oil price forecasting companies globally acting as sources for risk managers of oil firms did not see any reason

the price of crude oil should fall from above $120 to $28 per barrel within a period of 24 months despite the increase in production of shale oil with cheap production technology.

For instance, the CEO of an indigenous firm blamed the misfortune of his company on  loans acquired from Nigerian banks for participation in acquisition of assets  divested by multinationals when the price of crude oil was above $100 per barrel. ” We cannot make fresh investment to take advantage of the cut in rates by service companies since we have exhausted our credit limit with our banks,” he lamented.

For senior industry experts, there is no direction for  crude oil price currently. This was supported by the Managing Director of Petrocam Mr. Patrick Ilo who stated that during his postgraduate study, he was taught that ” the future of oil price tomorrow is unknown”,

Expressing the state of confusion over future oil prices, the former Minister of State for Petroleum Mr. Odein Ajumogobia in a text message stated that ” I am confounded as most analysts are-especially by the oil price. I didn’t believe that we would see oil dip below $30 a barrel as it did. I’m still trying to make sense of the oil market and related politics, viz OPEC and the conflicts within the organization particularly the old rivalry of Saudi Arabia vs Iran, with the prospect of increased Iranian production following the lifting of sanctions; Non OPEC oil producers led by Russia and their own determination not to cede market share notwithstanding the falling price; the continued glut not withstanding full storage tanks everywhere and declining shale production.

Ajumogobia added,” Then to compound our problems at home, the Naira value has tanked to N300 to $1 but the government seems to be burying its head in the sand and exchanging precious oil receipts at N198 per dollar when there must be at least N2.5 to N3 trillion deficit in a $6 trillion proposed budget”.

Another senior official of an indigenous E&P firm also blamed the misfortune of his company on the failure of the NNPC to make his company the operator of an asset acquired after divestment by one of the multinationals.

To avoid embarrassment of creditors and inability of companies to pay salaries of staff, some of the Chief Executive Officers  have tendered their resignations. One of the CEOs who resigned  was the Chief Executive Officer of  Eland Oil and Gas, Mr. Les Blair.

When Nigerian NewsDirect contacted  the Managing Director of  Well Fluid Limited Mr. Okoro Martins  for advertorial of the 20th anniversary of OWA, he stated in his reaction that there is no payment in Nigeria for now”.

However, Principal Consultant of Lonadek Consultants said that investors are waiting for the policy of the government to make fresh investment. She added that t he firm is talking to clients in terms of how to reduce cost so as to remain profitable.  ” The exciting news from the supposed bad days is that Nigeria is going to focus mainly on midstream and downstream of the oil and gas industry,” she suggested.

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