Nigeria reduces oil production cost by 70.5%, saves $3bn

By Uche Usim and Adewale Sanyaolu

The Nigerian National Petroleum Corporation (NNPC) says it has reduced the cost of oil production from $78 per barrel to $23, representing 70.5 percent reduction.
The Group General Manager of National Petroleum Investment Management Services (NAPIMS), a unit of NNPC, Engr. Dafe Sejebor, disclosed this during the inauguration of the Anti-Corruption Committee of the unit.
Sejebor’s statement came as the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, believes that the $23 per barrel cost could still be further brought down in an effort to attract new investments into the oil and gas sector.
Kachikwu, had during his visit to the Dangote refinery recently expressed worries that Nigeria’s cost of oil production remains absolutely high when compared with other OPEC countries including Saudi Arabia which produces at $9 per barrel
This however means that the NNPC’s acclaimed 70. 5 percent cost reduction achieved in two years which saved the country had saved an estimated $3billion per annum could still be improved to bring it in line with global best practices.
Sejebor said NAPIMS arrived at the figure after looking at the difference between the $78 and $23 which represent the old and new cost of production in relation to the present daily average production in the country.
“If you knock down your cost of production from $78 per barrel to $23, take the difference and multiply by the average daily production, you will discover that we are saving a minimum of $3billion in the upstream for both Production Sharing Contracts (PSCs) and Joint Ventures (JVs)”, he said.
The GGM informed that the target was to bring the cost of production to between $17 and $19 for onshore and offshore production respectively.
He commended the Federal Government for its support to the NNPC management in tackling the challenges in the petroleum industry, especially the cash call exit agreement signed in 2016 and the reduction of contracting circle from three years to six months.
On the new Petroleum Policy, Sejebor said it was necessitated by the increasing difficulty in operating the petroleum industry within the framework of the old Petroleum Act in the face of the delayed passage of the Petroleum Industry Bill (PIB).

 

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