Stakeholders in the oil and gas industry are worried that job cuts have risen by 33 percent in the sector this year.

The job cuts which stood at 300,000 in 2016 have risen to 400,000 in 2017 as a result of low oil prices, budget cuts, gross reduction in contracts and low capacity of firms.

Bank Anthony Okoroafor, Chairman, Petroleum Technology Association of Nigeria (PETAN), who confirmed the development in an exclusive interview with Independent, said that it has become impossible for many companies to pay salaries and retain the services of workers.

The stunning fall in oil prices, from a peak of $115 per barrel in June 2014 to under $35 at the end of February 2016 has impacted negatively on the Nigerian economy.

Since 2016, the oil sector – the source of more than two-thirds of Nigeria’s revenue and 90 percent of its export earnings – shrank nearly 14 percent resulting in inflation, job losses and naira depreciation.

Activity at the Lowest

“Already, over 400,000 direct and indirect job cuts have taken place. Many companies are unable to meet loan payments. Assets capacity acquired are endangered since there are no new projects or projects are deferred or cancelled, Activity level is at the lowest.

“Service industries that have built capacities and capabilities are laying-off well trained personnel, rig count is very low, well intervention and well completion activities are down to zero level,” Okoroafor said.

He noted that “insurgency in the North East, Niger Delta pipeline vandalism and militancy is development in reverse. It damages the country, reduces growth, kills people, conflict generates territory outside the control of a recognised government.

Also, companies owe service contractors. It should be noted that as a result of pipeline vandalism, operators have not been able to evacuate crude and thereby not spending.

“There are funding challenges. For instance, there is high interest rate on facilities from the banks, leading to poor funding of projects, apparently because banks are no longer lending. In other words, there is tightened access to capital with decreasing cash flows, highly leveraged companies will struggle as lenders and investors tighten access to capital, limiting their ability to continue exploration and developmental activities.”

Investment Limitations

Dr. Layi Fatona, Managing Director of the Niger Delta Petroleum Plc, said that the industry is haunted by youth unemployment and pipeline vandalism.

He disclosed that lack of long term investment capital remains a limitation that imposes a limit beyond which operators can go.

“These past many years, I note also what I consider as third party induced limitations which you cannot control, becoming major challenges. Take for example, the outage of the Forcados Terminal for the past nearly 15 months.

As an independent Nigerian company, hardly can any of us who produce into that facility control its availability or otherwise.”

“Yet, without it, many of us are walking corpses. It is the same for the Bonny Terminal. Last year alone, the terminal was unavailable for a total of 140 days. Can we control that? Of course, No! So now you see the importance of factors which you cannot control as a major challenge,” he added.

US Shale Oil Production

Osagie Okunbor, the new chairman of Oil Producers Trade Section (OPTS), a private sector umbrella body for the upstream oil and gas companies in Nigeria with indigenous and foreign owned companies as members, also identified some challenges which culminated in the retrenchment of the workforce.

“In recent years, our industry has had a number of challenges domestically and on the international front.

Significant decline in crude oil prices due to the rise in US shale oil production and slowdown in world economy, among others, require fundamental adjustments by operators in the industry, especially in the areas of cost optimisation and process efficiency in the face of declined earnings.

“I am happy to note that our members have responded remarkably well to these challenges and have continued to contribute positively to Nigeria’s economic development. With about 37 billion barrels of oil reserves and about 179 trillion cubic feet of discovered natural gas, the world’s 11th and 9th largest, respectively, Nigeria has the resource base to remain a leading hydrocarbon economy for the long term,” he added.

However, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has tasked operators to guide against reckless retrenchment of their members in the industry.

The association has also called on the stakeholders, especially the Federal Government, oil companies and regulatory agencies to tackled fundamental problems in order to solve the problems currently staring the industry in the face.

•Text courtesy of Independent.

Update news