Chevron Corporation, with third largest joint ventures (JV) in Nigeria, has slated 6,750 staff for possible sack globally. This, among other distress buoyed by the outbreak of novel coronavirus, is weighing on the oil industry that services 85 per cent of Nigeria’s budget. Adeola Yusuf reports
The Nigerian National Petroleum Corporation (NNPC) is not spared in the oil price rout rocking the world. As at the last count, the Corporation’s liquidity was, according to its Group Managing Director, Mallam Mele Kyari, affected and dipping the anticipated remittances to the Federation Account by N1.27 trillion.
Though Kyari, who said this in an engagment with the Nigeria Guild of Editors (NGE), highlighted measures the Corporation is taking to survive the siege, the industry will still need to do more to address the critical issues this scenario has created in other aspects of the industry.
The debts indigenous oil companies, for instance, are owing banks have hit $3 billion.
At the global stage
The United States super oil major, Chevron Corporation, has slated 6,750 staff for sack in one of the biggest global mass disengagements.
The mass sack, the company with third biggest joint ventures (JV) in Nigeria said, represented a cut of between 10 and 15 per cent of its worldwide workforce as part of an on-going restructuring at the second-largest U.S. oil producer.
Spokeswoman of Chevron, Veronica Flores-Paniagua, confirmed this, maintaining that Chevron, which has 45,000 employees, expects to remove about 10 per cent to 15 per cent of its global staff to “match projected activity levels.”
The oil producer previously disclosed a 30 per cent reduction in its 2020 spending and some voluntary job cuts amid this year’s sharp drop in oil prices and lower demand for oil and gas due to COVID-19 crisis.
Chevron has been widely seen as the standard bearer of financial discipline in the oil industry and was among the first to make significant budget cuts as oil demand plummeted.
Last year, it abandoned a takeover bid for Anadarko Petroleum Corp rather than get into a bidding war with Occidental Petroleum Corp.
Chevron pocketed a $1 billion break fee while Occidental has faced investor wrath for its ill-timed deal.
In March, Chevron began offering severance payments to some of its U.S. oil exploration and production employees.
Last year, it launched a major cost-cutting overhaul that has already pared the number of units.
Troubled terrain for indigenous firms
The liquidity crisis rocking Nigeria’s oil industry worsened at the weekend as debts profile of Nigerian oil companies to banks surged past N1.32 trillion ($3 billion).
Chief Executive Officer (CEO) of Seplat Petroleum Plc – one of the Nigerian firms – Dr. Austin Avuru, who said this last Wednesday at the Nigerian Association of Explorationists (NAPE) second Webinar series, entitled: “The New Normal Post-COVID-19 for the Oil and Gas sector in Nigeria,” declared that the poor servicing of the debts was being worsened by the coronavirus outbreak.
Operators in the Nigerian oil and gas sector are owing banks about $3 billion debts that are yet to be mitigated, he said.
According to him, it will be difficult for the banks in Nigeria to look the way of the oil and gas sector in providing credit facilities now and post-COVID-19.
He cited the dwindling fortune of the oil and gas sector occasioned by glut in the market and the volatile oil price.
“The oil and gas sector is the hardest hit this period,” he said.
However, the Seplat boss noted that banks coukd still honour some bankable projects despite the current challenges.
For instance, he mentioned that Seplat was receiving a nod from banks for its on-going project.
According to him, out of the $350 million facility expected from banks, about $150 million is to come from local banks in Nigeria.
He further pointed out that current realities had shown that oil revenue was trending downwards below 45 per cent as a percentage of total federal revenue for 2020.
According to him, this is unlike in the past where revenue from oil accounted for 80 per cent of federal revenue and 92 per cent of foreign exchange.
NNPC to the rescue
Meanwhile, the Nigerian National Petroleum Corporation (NNPC) has declared plans to crash oil production cost in Nigeria to $10 per barrel.
The GMD of the Corporation, who said this during an engagement with the Nigerian Guild of Editors (NGE), maintained that the oil price rout affecting the global market had rocked the Corporation’s liquidity position and cut anticipated remittances to the federation by N1.27 trillion.
Oil prices, Kyari said, “have gone down to sub $10/bbl due to the economic impacts of COVID-19 and crude oil supply and demand imbalances,” adding that the “oil price collapse below cost has led to production deferement across the world.”
He continued: “NNPC has, however, maintained steady production in order not to lose market share in the event of crude price recovery.
“Instead, NNPC has taken aggresive capital allocation to priotise low cost oil production and additional measures to ensure cost discpline across, including renogotiation downward of contracts and other business obligations, thus saving 40 per cent of proposed budget and cost.”
Stating that the Corporation had “rolled out strategies to achieve sub $10 per barrel UOC without jeopardising growth,” the GMD maintained that revenue flow “has been greatly impacted by fall in price of about 65 per cent, thereby affecting the Corporation’s liquidity position and the anticipated remittances to the Federation of about N1.27 trillion (April to December 2020).”
He maintained that low demand and uncontrolled supply sent global storage to tank top with about one billion barrels and refinery ourput cut due to demand fall.
“Net back value of crude for long haul journeys to China have declined to $1.05 per barrel on the first of April 2020 due to low price and high frieght cost,” Kyari said.
On the impact of COVID-19 on the Corporation’s business, the NNPC’s helmsman said it “has sustained operations despite disruptions and slowed down economic activities.”
Last line
The oil industry, like others, is being troubled, especialy by the fallout from coronavirus outbreak. However, stakeholders must work together to mitigate the effect and put the industry back on track.
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