Petroleum Africa
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Tuesday, April 28, 2015
The drop in oil prices that began last year is having a substantial impact on the economies of African producers. Algeria, who relies on its petroleum export revenues heavily is struggling to pay for its subsidies and welfare system. In an effort to alleviate its struggle, if only slightly, the country’s state-run firm Sonatrach is looking for oil service firms to cut their prices in the country.
According to industry sources cited in a Reuters report, the Algerian NOC is looking for up to a 15% cut in prices. The firm sent out a letter urging them to cut costs by 10-15%. Another source revealed that these same service firms were not thrilled with the Sonatrach letter.
Sonatrach spends $23 billion a year in service costs. It has also called on local firms to start looking at ways they can provide services for Sonatrach.
Sonatrach is not the only operator demanding discounts. As with the last bust cycle, operators, NOCs and IOCs alike, are putting the pressure on service companies to slash prices during this downturn. A dramatic decrease can be seen in the day rates of drilling rigs, but discounts are being seen across all service lines.
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