NNPC GMD To Oil Firms : You Either Produce At $10 Per Barrel in 2021 Or Leave

The Group Managing Director(GMD),  Nigerian National Petroleum Corporation(NNPC),   Mele Kyari,has said all oil producing companies in the country should be prepared to produce at  $10 per barrel in 2021 or leave.

Kyari said this on Wednesday during a Webinar  organised by the Nigerian Association of Petroleum Explorationists (NAPE) on the impact of COVID-19 on the Nigerian oil and gas industry and the way forward.

According to him,  $10 per barrel cost of production is now the expectation of the industry by  the end of 2021, adding that the cost was realisable as the NNPC was currently initiating  a new cost structure at the moment.

Kyari. “We did have a plan and of course , you have  to react to this situation, you need to bring down your cost  substantially.

“Our realisation is that there are areas that can be  utilised to bring down cost. The number of cost elements that we deal with today should not be there in the first instance.

“COVID-19 has come with its own good part, we have now realised how many people we can do without, services we don’t have to live with  and the end result is that we can work on our cost structure so that we can bring down the cost and then sustain production.

“You cannot explain the gap between one company producing oil at $93 per barrel and  another at $9 per barrel. It It is unacceptable, this cannot continue and the industry must work  together to bring this down.

“Our target is to bring the cost down to $10 per barrel for everybody, if you can’t do this, you walk  away because this is not a business of subsidy. Upstream is never subsidised anywhere in the world, it is  either you make money or you walk away.”

Berating the lack of efficiency among operators , Kyari stated that it would not be business as usual.He further stressed that  companies must learn how to be efficient, be cost-effective and do away with expenses that are not necessary.

Kyari said, “We need to also put measures in place to  ensure cost discipline across businesses, we are engaging our partners across the sectors, the reality is that today’s cost levels are unrealistic. 

“There are  several illegal practices in the industry and  the result is that you have a cost that is not possible to sustain, therefore we must reset this cost structure. That is  what we are doing and that is what COVID-19 has thrown at us and our target is to cut the cost structure to at least $10 per barrel.

“We must optimize revenue, we are going to focus on projects that will give us more  money, take out costs and give us more resources, and this is unavoidable in a situation like this, and we do not hope this situation sustains for too long.” he said.