Anxiety and fear have enveloped stakeholders in thenation’s oil and gas industry over the recent re-entry of Iran into the global crude market.
Already, there is strong apprehension that Iran’s latest return into the oil market may swallow over 150,000 direct and indirect jobs in Nigeria.
The dilemma is that Nigeria still depends on crude oil export for over 80 per cent of its foreign exchange earning while importing much of its requirements including refined fuel from overseas.
Unfortunately, the Petroleum Industry Bill (PIB) that could have unlocked the nation’s downstream sector is still locked down in intense politicking, leaving the citizens’ fate hanging in the balance.
Recall that since 2012 when the US and European Union imposed sanctions on Iran’s energy and financial services sectors, its oil exports have been cut by nearly half as a result, according to the US Energy Department.
However, six world powers, including the United States, recently reached a deal with Iran on limiting its nuclear activity in return for the lifting of international economic sanctions.
Unfortunately, the Iran deal is coming at a time when oil price has already taken a major hit following slow economic growth in Europe and development of shale gas by USA. Given the fact that oil price just began to rebound, in response primarily to increased buying by Asian giants – India and China, Iran’s return, observers believe, could lead to glut.
But beyond the issue of glut, which would eventually pose major revenue challenge for the country, experts believe it could signify massive job loss for the sector that is already contending with varying degrees of challenges.
Nigeria’s exports crude to China, India and Japan. But if Iran pumps additional one million barrels per day into the same market, things may become difficult for Africa’s largest economy in financing projects and meeting other obligations.
Although, the International Energy Agency (IEA) believes that Iran may not unload its stored oil at once since that could cause prices to crash, it noted that it could sell some 180,000 barrels per day for six months and this could alter price equilibrium in the market.
Meanwhile, Head of Energy Research at Ecobank Development Corporation (EDC) Nigeria Limited, Mr. Dolapo Oni, said he expects some job losses once the Iranian exports start.
Most of the job cuts, according to him, are likely to be in the oilfield services space where it is happening already.
‘‘So that could intensify. There will likely be pressure on government to shrink its workforce and biometrics, targeting ghost workers are likely to resume when that pressure builds. However, it depends on how well Nigeria uses the time it has between now and when the deal is finalised in quarter four to lock down its market share and boost domestic consumption via its refineries,’’ he said.
There are fears that this development may sound a death knell on the gains already recorded through the Local Content Law in the country’s oil and gas sector, which had succeeded in creating over 10,000 jobs in welding, fabrication and vessel building.
Also commenting, President, National Association of Energy Economics (NAEE), Prof. Adeola Adenikinju, submitted that the development would further compound job creation because at the moment, only few oil rigs are producing, and now, the entry of Iran into the oil market will make it tougher for Nigeria to sell its crude.
He said the situation would force some companies to reduce their workforce while those that are not cutting jobs may not be encouraged to employ more hands.
However, he said the situation is not really that hopeless if the country can take advantage of the downturn in oil market to put the right policies that would stimulate the growth of the downstream sector in place.
Adenikinju explained that the bulk of the job in the oil and gas chain is created in the downstream sector; hence, he called on government at the legislative level, to put fiscal measures in place by ensuring that the PIB is passed as quickly as possible.
Also, he said the domestic industry should be developed instead of just relying on crude export. By so doing, he said the country would be in a better position to refine its crude for local consumption while the rest can be exported to neighbouring countries.
He said despite the discount on Nigeria’s crude, selling it is difficult as a result of the inability of some of old buyers to patronise the country because they have either discovered shale oil or other sources of energy.
