Though Nigeria’s cost of oil production is currently above $20 per barrel, the Nigerian National Petroleum Corporation (NNPC) yesterday said efforts were ongoing to crash the fee to $10.
The corporation’s Group Managing Director, Mele Kyari, in a report in Abuja, stated that the operating cost across the nation’s upstream production remained unacceptable.
The slump in oil prices on account of the COVID-19 pandemic notwithstanding, the cost of the production of the black gold in the most populous nation has been hovering around $28.99 whereas it goes for less than $8 per barrel in some countries.
The rate is highest in the United Kingdom where it stands at about $44.33 (based on geological reasons), and lowest in Saudi Arabia at $8.98. Nigeria is believed to be the third highest at $28.99 after Brazil, which produces at $34.99. In Iran, the figure is only $9 and $10 in Iraq.
According to Kyari, the performance for the first quarter of this year necessitated further cost optimisation.
With the 2020 budget being repeatedly reviewed due to the shocks at the international oil market, the NNPC boss disclosed that some participating companies in the production sharing contracts (PSCs) still operate above the targeted $10 per barrel.
To crash the cost, he noted that five core areas had been identified, namely human resources, logistics, service management, direct handling and production maintenance, which accounts for about 80 per cent of joint venture operation expenses and 60 per cent of PSC expenses.
Kyari stated that the nation’s oil prices have gone down to sub-$10 per barrel due to the economic impact of the novel coronavirus, worsened by crude oil supply and demand imbalances.
He pointed out that between January and February this year, Nigeria lost 2.9 million barrels of crude worth $48.42 million due to pipeline breaches that occurred in 74 points.
The GMD added that crude oil production charge among producers and gradual reopening of economies across major energy consumption centres were helping the recovery of the market.
He urged the Federal Government to focus on exploring other natural resources, noting: “In times of low oil price, market indices have shown that solid minerals, especially gold, can provide an alternative revenue source to the federation.”
Kyari said the national oil company had scaled up measures to check vandalism and theft.