• Industrial sector records N8.9tn output

With the global oil price slump leading to cancellations of significant projects and delays put at $600 billion, oil and gas industry players have been urged to adopt cost-saving processes to remain in business.

The Managing Director/Chief Executive Officer, First Exploration and Petroleum Development Company Limited, Ademola Adeyemi-Bero, who gave the advice, said the over-supply and oil in storage are still at record levels, which is about three billion barrels.

He said global demand growth for oil would continue steady at 1.2 million barrels per day (bpd) per year.

He noted that the global over supply has been driven by the United States shale play and Canadian oil sands mines, despite the fact that United States oil and gas drilling experiencing a historic drop, well below 1990’s levels.

Adeyemi-Bero said US oil shale reservoir declined by 6.8 per cent monthly, but that these factors don’t have visible impact because of market over-supply. He said most private players were driven by major budget cuts and shortages and that Brent oil price has reached bottom level while Henry hub gas price touched below $2 per million standard cubic feet (MSCF) with the US exporting its first liquefied natural gas (LNG) cargo in over four decades.

According to him, the global supplier with untapped fields (wild cats), are Iran and Iraq, while the primary energy demand drivers are China, Organisation for Economic Co-operation and Development (OECD) countries and India, and all are yet to pick up.

Besides, he noted that all producers (Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC) that are able to grow production are increasing supply despite the oversupply, adding that highest cost tar producers – Venezuela and Canada – are still showing production growth.

To counter oil price volatility and instability, Adeyemi-Bero said smart solutions must be deployed to derive maximum value during project development and execution and throughout asset lifecycle operations.

He canvassed the use of low unit technical cost (UTC), such as maximizing hydrocarbon recovery and reservoir development and reservoir and facility management.

He said industry players had to minimize project delivery timeline and lifecycle development costs, that is, project delivery (wells and facilities) and operating costs, ensure enabling environment while eliminating third party interference.

To address the problem, Adeyemi-Bero said approval and contracting cycle should improved, adding that the Joint Venture (JV) contracting and procurement and approval processes significantly erodes project value.

He also noted that JV cash call processes in the last 10 years has killed growth. He said hydrocarbon recovery has to be maximized, wells and facilities development costs minimized, and also minimize deferments through efficiency in operations and maintenance of equipment.

He said production losses and decline can be minimized through efficiency in export operations, production metering and reconciliation, efficiency in wells, reservoir and facilities management.

In the meantime, the manufacturing sector recorded an increase of N289bn in its output from N8.68tn in 2014 to N8.94tn at the end of December 2015, figures obtained from the National Bureau of Statistics have revealed.

According to the NBS, there are 13 activities in the manufacturing sector made up of oil refining; cement; food, beverages and tobacco; textile, apparel and footwear; wood and wood products; pulp and paper products; chemical and pharmaceutical products.

Others are non-metallic products, plastic and rubber products; electrical and electronic, basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.

An analysis of the output for the manufacturing sector showed that despite the harsh operating environment, which had led to massive job losses and closure of some industries, the sector continued to show resilience.

Apart from oil refining and other manufacturing activities, which recorded a decline of N137.79bn and N3.39bn from N385.81bn and N434.49bn to N248.02bn and N431.1bn respectively, other activities in the sector experienced some level of growth.

For instance, there was an increase of N145.32bn in the cement industry from N604.61bn in 2014 to N749.93bn, while the food, textile, wood and paper products industries rose from N4.24tn, N1.81tn, N238.5bn and N59.92bn to N4.29tn, N1.87tn, N259.25bn and N66.09bn, respectively.

The pharmaceutical industry recorded N35.51bn increase in output from N154.61bn to N190.12bn while non-metallic products, plastics, electrical, iron and steel, as well as motor vehicles also grew from N259.28bn, N221.95b, N5.75b, N195.76bn and N67.14bn to N315.59bn, N267.16bn, N6.02bn, N207.3bn and N70.05bn in that order.

In terms of the quarterly performance for the manufacturing sector, the NBS report said, “Nominal growth of manufacturing in the fourth quarter of 2015 was recorded at 6.93 per cent year-on- year, 12.19 per cent points lower than the 19.12 per cent recorded in the corresponding period of 2014 partly as a result of higher operating costs.

“Growth was 2.13 per cent points higher than the third quarter of 2015 which was recorded at 4.8 per cent. On a quarter on quarter basis, the sector grew by 0.33 per cent.”

It said the contribution of the manufacturing sector to total economic output was 9.09 per cent in the fourth quarter of 2015, lower than the 9.11 per cent recorded in the corresponding period of 2014, and 9.67 per cent in the third quarter of 2015.

Commenting on the output of the sector, analysts said despite the resilience showed by the sector in 2015, there was need for government to come up with a well- articulated industrial strategy that would assist in addressing the structural challenges which had made the operating environment hostile.

A former Managing Director, Unity Bank Plc, Mr Rislanudeeen Muhammed, told our correspondent that while incentives for manufacturing were already in place, there was a need for cohesion of policies to achieve the needed impact.

Muhammed, who is also the CEO of Safur Investments Limited, said, “There is no way that you can grow an economy without a well-articulated development strategy.

“This is the best time that we need to look ourselves and come up with a synchronised and excellent structure that facilitates cohesion of policy among the Federal Ministry of Finance, National Planning Commission, the Central Bank of Nigeria, the Debt Management Office and the Office of the Economic Adviser to the President.”

Also, the President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, told our correspondent that while the tough operating environment had led to the closure of so many companies, the uncertainty in the foreign exchange market, infrastructure deficit and the absence of adequate incentives to attract investors into key sectors of the economy needed to be addressed.

He said, “The Abuja Chamber of Commerce and Industry has made it known to the government that the issue of power and energy must be urgently addressed in order to promote industry, boost productivity, and attract both foreign and local direct investment.

“Power and energy sufficiency is the fulcrum of any meaningful development of the economy. This is the time for us as a nation to start implementing consistent policies geared towards attracting investments that will revitalise our industries.”

He said the that the nation’s economic growth rate, which had fallen from an average of five per cent two years ago to about 2.71 per cent, was as a result of the prevailing problems facing the country.

Nation with additional report from Upshot