Sylva: Oil Market Players’ Survival Depends on Effective Cost-cutting Measures

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Timipre Sylva

By Emmanuel Addeh

Minister of State for Petroleum Resources, Chief Timipre Sylva, yesterday stated that the survival of players in the oil and gas industry would depend on their ability to adopt lower cost solutions.

The minister, at the 2020 conference of the Nigeria Association of Energy Economists (NAEE) in Abuja, said the pandemic provided the opportunity for reducing costs as well as carbon emission that will transform the industry.
He added that the future and survival of many players depend not only on cleaner energy but also on the ability to deploy lower cost solutions and seek diversification from crude oil to cleaner energy.

Sylva said the country was proposing a post COVID-19 era where the transformed national oil firm will be swift to respond to oil prices fall and carbon emission reduction.

“Our strategy to strengthen the Nigerian oil and gas industry in a post-COVID world is to transform our national oil company into a diversified energy holding company to enable us respond swiftly to the twin challenges of future crash in crude oil prices and de-carbonisation by moving rapidly to becoming an energy holding company with more divested interests.

“Consequently, we have focused on our gas resources as a critical transition fuel to help battle global warming and function as a bridge between the dominant fossil fuel of today and the renewable energy of tomorrow,” he said.

According to him, natural gas has the ability to meet the increasing global requirement for cleaner energy use and also facilitate economic growth through domestic use.

He stated that gas will become an alternative to petrol and diesel to cushion the effects of deregulation on the people.

The minister described the discoveries of COVID-19 vaccines in Russia, North America, China and various parts of the world as a game changer, recalling that the members and non-members of the Organisation of the Petroleum Exporting Countries (OPEC) had on May 20 met to decide the curtailment of oil production volume due to oversupply.

The minister said the curtailment had saved the industry and expressed hope that the global economy would eventually recover.

The industry, he said, is grappling with over-supply issues from the US shale and struggle for market shares among producers.

He, however, said the pandemic, which is now in its second phase, had continued to dampen the structure and dynamics of the energy industry.

He stated that the impact will vary across the oil and gas industry segments, adding that while oil companies with low reserve will push to accelerate production, those with higher cost structures will struggle.

The minister said due to low revenue, there would be debate on the prioritisation of oil reinvestment and social needs while some governments would take the chance for spurring support for energy transition and diversification.

“The future survival of many players in the industry depends not only on focusing on renewable energy sources but also upon an ability to deliver lower-cost solutions.

“Our vision is to diversify into more diverse interests. We are focusing on our gas natural resources to function as a bridge between fossil fuel and the energy of tomorrow,” he said.