The oil and gas industry in Nigeria is extremely important to the country in terms of what it contributes to the economy and the necessity of energy for day to day living. This write-up will highlight the impact that the COVID-19 pandemic is having on the Nigerian oil and gas industry currently and in the long term. A good place to begin this discussion is the current state of collapsing oil prices. Due to a combination of reasons such as the expiration of production cuts by the Organisation of the Petroleum Exporting Countries (OPEC), the disagreement between OPEC+ on extending production cuts, Saudi Arabia increasing production, the trade war
between Saudi Arabia and Russia and the economic effects of COVID-19, there have been negative supply and demand shocks which have in turn resulted in significantly low oil prices.
In fact, as at night time on 21st April 2020, Brent crude fell to $15.98 per barrel, a price not seen since 1999. US oil prices turned negative for the first time as oil producers without storage space began paying customers to take their barrels from May 2020. Oil analysts think that even with Russia, Saudi Arabia and a few other oil-producing countries agreeing to cut production by up to as much as 15 million barrels per day (bpd), it would not be enough to balance the market in face of a deep economic recession caused by the COVID-19 pandemic.
Demand for oil has dropped by about 25 million barrels per day due to COVID-19 lockdowns. Of course, demand for crude will rise again as countries begin to relax lockdowns and resume business activities, but this will take time. Undoubtedly, this will have an impact on Nigeria’s oil and gas industry and the economy at large.