Dwindling Oil Prices: MainOne Urges Oil, Gas Coys To Adjust Business Models

Opeke Pix Courtesy:www.thelagosoilclub.org

Pix Courtesy:www.thelagosoilclub.org

The Chief Executive Officer of MainOne, Ms. Funke Opeke has advised oil and gas companies in the country to adjust their business models to survive in a non-oil economy.
The advice is coming on the heels of the fall in the global oil prices which has led to dwindling revenues for oil and companies around the world including those in Nigeria.
She also advocated for Information and Communications Technology (ICT) for improved cost efficiency in Nigeria.
She identified the role of ICT in driving down costs and optimizing operational efficiency for oil and gas companies, to enable them operate profitably.
She noted that changes across the global oil and gas sector require new models to managing information, analyzing seismic patterns, and optimizing outcomes in both downstream and upstream operations.
Explaining further ,MainOne pointed out that within the last two years, upstream oil companies have faced over 70 per cent drop in their revenues, as barrel prices dipped from $90-$100 to below $30 per barrel, adding that for the commodity producers are not left out .
The company stated that business experts at Morgan Stanley believed the free-fall was well on its way to the $20 range and lower and that the collapse of oil has benefited countries that consume oil and other oil derivatives, at the expense of oil-producing countries such as Nigeria.
“For a country heavily dependent on crude oil, the negative impact from recent oil prices is greater in Nigeria than in other exporting countries because lower oil revenues decisively affect its public finances. Consumption has declined on all levels and in both private and public sectors, employers struggle to meet overheads and other financially-related obligations.” the company said
It continued, “Nigeria’s foreign exchange index is also not spared as the Central Bank of Nigeria has had to devalue its currency twice in one year, as a result of falling oil prices. While a generality of enterprises businesses have been affected, oil and gas and other manufacturing companies have been most impacted.”
MainOne pointed out that as part of austerity measures to mitigate the price crash, key players in the industry have cut capital and operational expenditures and headcount, deferred major capital projects and pushed for better prices with their suppliers.
To buttress its point, the company quoted ‘The Financial Times’ as saying that the world’s big energy groups have shelved $200 billion of spending on new projects and that this comes amidst wider retrenchment by the industry which has seen thousands lose their jobs.
MainOne also cited the comment of the former National Industrial Relations Officer of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Hyginus Onuegbu, who according to the company said recently that Nigeria’s oil and gas companies have cut about 120,000 direct and indirect jobs, as a result of low oil prices.
It added that despite their efforts, a lot more has to be done to evolve the industry into a leaner, stronger oil and gas sector.
The company also cited a report from Wood Mackenzie tagged ‘M&A Outlook for 2016’, where its Corporate Analysis Research Director Luke Parker stated that, should oil prices remain low, companies would ill be forced to sell assets and merge businesses in order to free up capital, cut costs and survive amid growing financial pressures.
According to MainOne, “Industry players will have to concentrate in areas which they have proven capabilities and nurture their outperforming assets, while shutting down lagging liabilities permanently.”
“To emerge leaner and more agile, outsourcing specific technology or business process functions is a proven way of reducing both capital and operating costs. This enables the company to transfer the need to make significant capital expenditure, such as large investments in technology infrastructure, to its vendor at much lower costs.” It said
It maintained that to remain profitable, oil and gas companies must also consider how to gain operational efficiencies through improved use of technology, adding that with rapidly shrinking budgets, business leaders have little patience for high-priced, long-term IT slogs.
“I would rather pay for something over time with a predictable budget and SLAs than have a large, one-time outlay with lots of execution risks,” a CTO who pleaded anonymity said.