Nigerian oil servicing firms are struggling to offset their dollar-based bank loans as demand for the U.S. currency leaped amid a plunge in crude oil prices and foreign exchange restrictions by the Central Bank of Nigeria, CBN.
Consequently, banks were said to be considering lowering their lending bases to oil service companies, Daily Trust learnt.
Service companies are those providing support services to oil and gas companies, ranging from drilling, surveying, cementing, casing (treating wells) among others.
Many have embarked on an aggressive capital-cutting plan that involved cancelling or delaying projects and reducing headcounts.
The effect of these, according to the CEO of Oildata Energy Group and Chairman of the Petroleum Technology Association of Nigeria (PETAN), Emeka Eneh, was the continuous drop of Nigeria’s rig count and declining reserves.
Eneh, in a presentation, last Thursday in Abuja, said: “From the service companies’ perspective, it is brutal. We have PETAN members who are virtually under the weather because they have to pay back serious dollar-based bank loans at a time when they can’t even source the dollar.
“Our reserves and production is declining, if you take out deep water production the story is quite dismal. Ever since I got into this country, we have been about 2 million barrels it hasn’t changed by much.”
There was also mounting pressure by oil companies for service firms to crash their prices by 40 percent.
But Eneh said cost reduction needed to be industry wide, adding that service companies should not carry the brunt alone.
“Dollars per barrel is made up of not just service company costs but you have development cost, opex, infrastructure cost and something that is hidden there in the middle called the high systemic cost which are prevalent in our industry. For example, if a Nigerian technician needs to go offshore, he buys an ID card for close to $1,000, he renews that every year, it adds up after a while.
