Experts in the oil and gas sector have sounded a note of warning to the federal government on the impact the fresh outbreak of omicron variant of COVID19 will have on the development of the oil and gas sector of the Nigerian economy; adding that the result might be too damning for Nigeria in spite of the increase in oil production ceiling.
This warning came following the decline in output due to shut-ins amid ongoing repairs and maintenance at critical oil facilities including Forcados and Qua Iboe (jointly accounting for c.25% of total oil and condensates production) which punctuates Nigeria’s capacity to benefit from the relatively high oil price.
They implored the Federal Government to implement strategic policies that will boost the non-oil sector as the outbreak of the Omicron variant – said to be resistant to existing vaccines and more virulent than previous mutations has spooked the oil market with Brent futures slipping below $70.00/bbl, adding that the crude oil bellwether, against which Nigeria’s Bonny light is benchmarked, has shed 18.1% .
The experts said that efforts of Federal Government was needed to initiate policy measures that will address security, legal and regulatory environment as other influential variables to investors in non-oil sector when designing fiscal strategies to attract investment and economic growth
According to them, given the risk of the omicron variant and its reported resistance to the available vaccines, countries may have no choice than to reinstate lockdowns which may inevitably slow down activities in the economy; and the oil and gas sector will be deeply affected.
The Organization of the Petroleum Exporting Countries (OPEC+), in its communique released at the end of the meeting, last week reaffirmed its monthly production adjustment plan, raising overall production for January 2022 by 0.4mbpd.
This came despite fresh threats to global oil demand by the Omicron (B.1.1.529) variant of COVID-19 and the possible release of strategic oil reserves by the US.
Nonetheless, the cartel noted it would continue to watch market developments and make immediate adjustments if required.
With this decision, the overall output quota for members and allies was effectively raised to 40.5mbpd for January 2022 (December 2021: 40.1mbpd). Similarly, Nigeria’s production quota increased to 1.68mbpd from 1.67mbpd.
“We note that the outbreak of the Omicron variant – said to be resistant to existing vaccines and more virulent than previous mutations – has spooked the oil market with Brent futures slipping below $70.00/bbl on December 1 for the first time since late August 2021” , the analysts argued.
Consequently, the crude oil bellwether, against which Nigeria’s Bonny light is benchmarked, has shed 18.1% (to $69.67/bbl. as of December 2) since South Africa reported the variant to W.H.O on November 24, 2021.
With additional reports from daily independent