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The impact of Covid-19 pandemic on Oil and Gas Projects in Nigeria


COVID19, first discovered in Wuhan City, Hubei Province of China in December 2019, has now become a global pandemic as declared by WHO. Statistics indicated that as at 23rd of May, 2020, a total of 5,061,476 cases have been confirmed with 254,045 deaths worldwide. Unfortunately it is the same story in Nigeria with 7,261 confirmed cases and 221 deaths. The economic impact of COVID-19 may result in the suspension of key oil and gas projects running into millions of Dollars, which invariably would have a significant effect on the Nigerian economy.

Oil and Gas Projects impacted by Covid -19

Governments’ reaction to curtailing the spread of COVID-19 via lockdowns and restrictions on any form of travel, has caused a major impact on the Oil & Gas Market. The International Energy Agency (IEA) in its mid-April Global Energy Review, shows that countries in full lockdown are experiencing an average 25% decline in energy demand per week and countries in partial lockdown, an average of 18% decline. The Energy Review further tells us that oil demand was also hit strongly, down nearly 5% in the first quarter, mostly by curtailment in mobility and aviation, which account for nearly 60% of global oil demand. By the end of March 2020, global road transport and aviation activity were almost 50%  & 60% below the 2019 averages respectively. With factories, business and travel shut down – refinery demand fell, storage capacities became full – crude oil futures sales plummeted completely hence the drastic drops we witnessed at the end of April and early May.

COVID-19’s effect on oil prices globally, has affected revenue generated by oil producing countries including Nigeria and companies operating in Nigeria. With the tanking of revenue levels, several capital projects will get re-evaluated and possibly shelved, as the capability of financing these projects resides in part with the Federal Government of Nigeria being able to fund their percentage. The current economic impact of COVID-19 will definitely place a significant strain in achieving FID on key strategic projects for International Oil Companies (IOCs). Italian multinational – Eni and French major -Total have implemented the most substantial reductions in capital expenditure, for example – reducing their respective investment in exploration and production projects in 2020 by 25% which will definitely impact CAPEX for their Nigerian portfolios.

Assessing through various oil and gas projects in terms of cost and the projected daily production capacity, reveals the inherent benefits derivable from their implementation. However the Covid-19 pandemic could, in the medium to long term, deprive the Nigerian populace of the social and economic benefits of these projects. In addition, other factors such as the new fiscal regime and existing, but unimplemented reforms in the Nigerian Oil and Gas sector, as constituting other storms of a sort to push such development projects to the back burner especially at this time.

With such significant spending cuts by Eni and Total, projects such as Total’s Perowei Field Development (50 kbpd), NAOC’s Zabazaba Development (apprx. 150 kbpd) could be delayed substantially. Other developments whose funding are based on close to $60 per barrel would also have to be re-calibrated – Shell’s Bonga South West / Aparo (apprx. 150 kbpd) and ExxonMobil’s developments with approximate combined daily outputs of 250 kbpd (Bosi, Owowo West and Uge-Orso).

Cascading Effect of the Suspension of Oil and Gas Projects

Direct and indirect effects on the Nigeria economy:

  • Loss of skilled and unskilled workforce indirectly will affect families and reduce their source of income.
  • Suspension of Corporate Social Responsibility Projects to the host communities will impact on daily life. Many CSR projects that will lead to the development of relevant areas will be abruptly affected. These CSR projects include road networks, provision of quality water supply, electrification, provision of classroom facilities and construction of standard markets represent some of the benefits that usually accrue to host communities from projects.
  • This results in revenue losses and lack of patronage for secondary markets like hotels & restaurants, hospitality centers that provide temporary accommodation to the workforce for these onshore and offshore projects.
  • Closure of sub-contractors’ businesses involved in the leasing and supply of equipment.
  • Projected tax revenue from these projects will have to be postponed or delayed to future dates. These taxes include the NDDC, ETF, PPT, Royalty, and CIT.

Solutions to alleviate the losses incurred

  • A possible review of FGN’s current Oil & Gas fiscal framework to ensure a quick return to the table, could guarantee the execution of these projects. It is noteworthy that these projects had already suffered earlier delays due to previous economic slowdown and changes to prevailing fiscal regimes.
  • The lack of a large wallet for stimulus leaves Government’s with the only chance of re-starting this side of our economy in the direction of reforms. The long-overdue implementation of oil & gas reforms could encourage an inflow of FID including the funding of these projects and possibly accelerate their development.
  • The local SMEs that operate as potential Sub-Contractors should get access to the special CBN bailout fund set out by the FGN to the tune of N50billion Naira.
  • A possible review of the government’s current oil and gas fiscal policies to encourage a quick return to the table by IOCs, immediately the economic situation improves to guarantee the execution of these projects.


As Covid continues to ravage the global oil & gas industry, Nigeria cannot escape as an exception. The realistic landscape now has suspended projects, which have entered the waiting game ahead of future dates for execution, effects on the economy and social lives of Nigerians. A proactive and structured approach involving all stakeholders is deeply required to create uniform solutions.


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Written by Martin N. Chukwuezi.

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