As a result of the slump in the price of oil occasioned by the ravaging Coronavirus (COVID-19) pandemic, Nigeria’s independent oil producers are being squeezed by the oil price crash. The current prices are more than two times lower than the costs of local independents’ production.
According to the records, these small independent oil companies pump a fifth of the oil in Africa’s largest oil producer. Mr. Kola Karim, the Chief Executive Officer of Shoreline Group, one of Nigeria’s third-largest independent oil firm told Bloomberg in an interview that, “The impact is a complete and utter disaster.”
The independent companies in Nigeria are struggling to stay afloat at benchmark Brent Crude in the $20s, which means Nigeria’s barrels are sold in the teens. And that’s if there is buying interest at all amid the growing global glut and crashing demand. Independent firms produce around 400,000 bpd out of the 2 million bpd that OPEC member Nigeria pumps.
But independents need oil prices at $35 to $40 per barrel to cover their cost of production, compared to the average $22 a barrel price the international oil majors operating in the country need to cover those costs, according to Bloomberg. Top executives at several independent Nigerian oil firms have also told Bloomberg that some companies are drowning in debt at the current oil prices while others have frozen their production expansion plans.