Page 11 - AfrOil Week 12 2020

AfrOil POLICY AfrOil
 In the next three months alone, Africa stands to lose more than $110bn worth of taxes, jobs, hydrocarbon exports and contracts awarded to local companies, it asserted.
“While the African Energy Chamber has a fundamental belief that we have to let the mar- ket work for itself, it encourages African coun- tries that have engaged petroleum operators and local service companies to find ways to relieve the burden on exploration programmes and local companies,” it said.
The AEC suggested specifically that oil and gas-producing states could offer tax breaks to local oilfield service providers, which were already under considerable pressure as a result of bearish trends on world crude oil markets. “As a possible solution to these growing issues, African governments should consider imposing immediate cancellations or postponements of tax payments for a period of up to three months for African-owned service companies, indige- nous exploration and production companies and all international and local companies work- ing on exploration programmes,” it said.
Tax concessions would help local service providers keep paying their employees and pre- serve jobs while also mitigating their revenue losses and improving liquidity, the group said. It would also give them a better chance of riding out the crash in world oil prices, it added.
N J Ayuk, the executive chairman of the AEC,
noted that the stakes were high. “It is a hard time for African oil and gas,” he commented. “And if the oil price does not see a hike soon, there is a likelihood that a lot of jobs will be lost in many petroleum-producing countries, and those who were expecting to see first oil soon will be heav- ily impacted.”
Ayuk also stressed that the strain on local businesses would have unfortunate socioeco- nomic consequences. “Final investment deci- sions [FIDs], new field developments and gas projects also stand to see delays or cancellations, which will have a massive effect on many Afri- can businesses and communities who view the industry as an opportunity to move from pov- erty to the middle class,” he said.™
African service firms are under pressure from low oil prices (Photo: Oilserv Ltd)
Nigeria may cut Bonny Light, Qua Iboe
crude prices by at least $3 per barrel
Abuja’s decision could push prices for Brent crude down even further
NIGERIA
NIGERIA will reportedly join Saudi Arabia in selling its oil at a significant discount to Brent, one of the world’s main benchmark crudes.
The West African country is gearing up to start selling Bonny Light and Qua Iboe grades at prices that are at least $3.00 per barrel cheaper than Brent in April, Bloomberg reported on March 23. The news agency also published a graph showing that Bonny Light might be sold at a discount of around $3.25 to Brent next month.
This is the first time Nigeria has offered its crude at such a steep discount. Bonny Light and Qua Iboe are usually much closer in price to Brent, as they are gasoline-rich crudes with significant appeal for refinery operators. (They are also comparable in quality to Brent.)
That appeal has remained strong over the years. Even during the Great Recession of 2008- 2009, for example, the gap between Brent and
Nigerian crudes stayed relatively narrow. In recent weeks, though, world oil prices have cratered.
Under pressure
At the beginning of this year, oil markets were already somewhat bearish because of sluggish demand and ample supply. Since then, they have become even more bearish, largely owing to the coronavirus (COVID-19) outbreak.
Initially, the virus raised questions about energy demand in China, the world’s largest oil importer. By mid-February, these concerns were serious enough that they led several OPEC members to call for at least 600,000 barrels per day in additional production cutbacks to sup- plement the 2.1mn bpd reductions that were already in force. But at the OPEC meeting on March 5-6, Saudi Arabia pushed Russia to accept an even deeper cut of 1.5mn bpd
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