* African oil states lack cash to weather price shock
* Saudi/Russia fight costs producers money, market share
* Delayed spending may cost 200,000 bpd of output -Rystad
* Lost output could lead to further budget pain
By Libby George
LAGOS, March 30 (Reuters) - Collapsing oil prices have left
African producers facing not only lost revenue when they most
need it to tackle coronavirus, but also a fall in hard-won
market share they may never regain.
The continent's producers such as Nigeria, Angola and
Algeria cannot compete with the lower costs of erstwhile allies
Saudi Arabia and Russia, who are flooding the market with oil.
In a sign of their desperation, the Republic of Congo's oil
minister wrote to OPEC secretary general Mohammad Barkindo on
March 20 calling for an urgent meeting to find a way to keep
member nations from sinking into recession.
But while desperate for OPEC+, the Organization of the
Petroleum Exporting Countries plus Russia, to ride to the
rescue, Africa's oil producers have little leverage over them.
"They have no power," one Nigerian oil industry source told
Reuters. "All they can do is ask."
Although non-OPEC nations such as Britain, Norway and the
United States all have relatively high-cost production, their
diversified economies mean they are not dependent on oil.
As well as hitting already tight budgets, the oil price drop
had led oil majors to cut billions from spending plans. The
longer-term impact for the comparatively costly African fields
could be far more painful.
"Companies are reviewing their whole portfolios on a daily
basis," said Roderick Bruce, principal research analyst for
Africa at IHS Markit, which forecasts final investment decisions
on the continent could hit historic lows this year.
"They (African countries) are in a very difficult position,"
Bruce added, citing their higher production costs.
In Nigeria, for instance, production is forecast to fall by
35% without offshore field investments. Across Africa, Rystad
estimates delayed spending could mean 200,000 barrels per day
(bpd) drop in expected output by 2025. discipline that's going to be introduced will be a
shock to the system," said Alex Vines, head of the Africa
Programme at British think-tank Chatham House.
"This is really different terrain, and these are very
vulnerable economies," Vines added.
Larger nations are also elbowing African producers out of
incredibly competitive spot trade.
They cannot match the agile, aggressive marketing that saw
Saudi Arabia slash its selling prices almost immediately after
the collapse of the OPEC+ deal. By comparison, Nigeria took nearly two weeks to make record
cuts to its official selling prices.
The country is also struggling to sell its oil, which is
rich in the gasoline and jet fuel that the world is not using as
a result of the coronavirus pandemic. While Angola's production has fallen from close to 2 million
barrels per day (bpd) a decade ago to 1.4 million bpd, it had
been in the midst of reforms which were meant to boost output.
And Equatorial Guinea is trying to auction new licenses and
find a replacement for ExxonMobil, which wants to leave.
CASH CRUNCH
The sudden cash crunch is also hindering the ability of
Africa's oil producers to manage growing coronavirus outbreaks
and a group of African finance ministers has called for a $100
billion stimulus package to help deal with the pandemic.
Health systems across the continent are already chronically
underfunded and citizens are often too poor and tightly packed
in slums to stock food or self isolate, while the oil crunch
also casts doubt on whether nations can craft rescue packages or
pay soldiers and police to enforce lockdowns or combat unrest.
Nigeria, which has cut nearly $5 billion from its budget and
promised a halt to all non-essential projects, said it needs 120
billion naira ($333.33 million) to fight the coronavirus
outbreak. Algeria, whose public debt rose to 45% of gross domestic
product at the end of last year from 26% in 2017, plans 30%
public spending cuts and has directed state energy firm
Sonatrach to halve planned investment to $7 billion.
Angola, where oil production has fallen steadily in recent
years, is mulling a $3 billion Eurobond offering to shore up a
budget based on $55 per barrel oil, while debt-ridden Congo
Republic has been trying to renegotiate $1.7 billion of
oil-backed loans.
($1 = 360.0000 naira)
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Fiscal Breakeven Price https://reut.rs/2vWQKqy
Estimated 2020 cash costs for oil fields https://reut.rs/33NLWjy
African Oil Producer Debt to GDP Ratios https://reut.rs/33PAILu
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