Era Of $30 Per Barrel Oil Production Cost Gone – NNPC GMD

The Group Managing Director, Nigerian National Petroleum Corporation Mele Kyari has said that it is no longer profitable to produce oil at $30 per barrel, adding that such huge costs does not make a country competitive in the crude oil market.

He said it had become imperative to understand that the current market reality cannot support inefficiency and escalated costs of operations in the oil and gas industry.

With the negative impact of the Coronavirus pandemic on global economy which had led to an unprecedented decline in the global price of crude oil, cutting the cost of oil production by Nigerian oil companies had become imperative.

Based on official statistics, Nigeria is one of the oil producing countries that has the highest cost of oil production.

For instance, while it costs an average of $8.38 to produce a barrel of crude oil in Saudi Arabia, it costs Iran and Iraq about $9.08 and $10.57 respectively.

It costs Nigeria a minimum of $17 to produce a barrel of crude oil.

With the negative impact of the Coronavirus pandemic on global economies, the price of crude oil dropped to an all time low of about $21 per barrel in April from $46 in February this year.

But while the global crude oil market has started experiencing a rebound in activities, thus making the product to sell for about $44.94 per barrel, experts have said that it had become compelling for the Federal Government to, as a matter of survival, cut the price of oil production.

Speaking at the 38th International conference of the Nigerian Association of Petroleum Exploration, the GMD, affirmed that with the current realities in the market, only those that can produce with the most efficient cost will survive the oil market going forward.

He said “It is instructive to understand that the current market reality cannot support inefficiency and escalated costs of operations.

“The era of $30/bbl oil no longer exists. I therefore urge you to continue to demonstrate professional commitment to help the industry survive.”

He said that sustaining industrial operations and making progress means improving efficiency, reducing costs, eliminating wastages, entrenching Accountability among others.

Kyari said, “The covid-19 came with a drastic decline in the demand for oil and businesses must adjust and do things differently, pull down cost and increase revenue by reviewing the local portfolio with partners.

“The Corporation had made significant progress in improving operational efficiency through the adoption of technology and deliberate effort to curtail soaring cost of operations across strategic assets.

“As a National Oil Company, our response to situations like COVID-19 is not to shut down operations owing to the linear relationship between the oil industry and our Nation’s economy.

“What first come to mind is how to survive and sustain our operations.

“Let me appreciate the good work of NNPC’s in house professionals in the ongoing inland basins exploration activities that culminate to recent discovery of hydrocarbons in Gongola basin. We’re proud that it is NAPE members that are spearheading this effort.

“We focus on reducing cost, and we cannot reduce cost without collaboration, cut down cut by looking critically on admin cost which is a huge part of the cost element. investing in new terrain, particularly refocusing on gas development.”

The GMD, noting that the gas sector has proven resilient through the Covid-19 experience, call for the quick passage of the Petroleum Industry Bill to aid development of the sector as well as attract investment to the sector.

He added, “This pandemic has taught us that gas sector would be the great player in the transition fuel scenario, hence we are refocusing in the gas development particularly the domestic market and for export”.

“We are truly a gas country, we have over 6 trillion cubic feet of gas that is yet to be extracted and we have done very little to the gas we have, the PIB would be the solution to this.

“By the mid of next year we would see this come to pass, and once this is done we would see the new vigor of investment in the industry particularly the gas sector.”

The Chairman, AMNI International Development Company Limited, Tunde Afolabi, in his address confirm that the cost of production in Nigeria remain the highest compared to other nations.

He added that there is an urgent need to review the cost in for operators to remain competitive.

He said, “The future of the Nigeria oil and gas industry is promising, as we continue to progress in the adoption of new technology, with the appropriate funding mechanism put in place for the industry, the possibilities remain endless for the industry, this way we can cut down on cost and achieve more.”

The Vice President, Yemi Osibanjo, in his remark noted the fact that growth and development of some nations, such as Nigeria has remained dependent on energy availability and utilization, especially on crude oil and increasingly on natural gas.

He said there is need to promote cost cutting programs to ensure sustenance in the industry.

Osibanjo, who was represented by the Minister of Petroleum Resources, Timipre Sylva said that the past few months have been challenging to the oil producing nations owing to the the sudden slump in crude oil prices caused by the collapse in demand due to the pandemic.

He added, “The challenges faced by the oil producing nations in the past few months due to low oil price have largely resulted to lower revenue generation for the government.

“Hence, one of the current cardinal mandate of the ministry of petroleum resources is to drastically reduce the unit cost of production of crude oil in order to increase government revenue.

“It is imperative that in our current era of scarce resources, we should aim at reducing the unit cost of production to a single digit. Concerted effort should be brought to bear to achieve and sustain this.”