Nigeria Blames Expatriates, Others for High Production Cost of Oil

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Nigeria has confessed that its highest crude oil production cost come from indigenous oil firms. It also stated that the deployment of expatriates was contributory to high production cost, as some companies produced crude oil for as high as $45/barrel.

Speaking during the Seplat Energy Seminar 2020 webinar, the Group Managing Director, Nigerian National Petroleum Corporation (NNP{C), Mele Kyari, last week, said the cost of the commodity had hovered around $43/barrel in about two weeks.

The Minister of State for Petroleum Resources, Timipre Sylva, who gave the opening remarks at the summit, stated that government had rolled out strategies to reduce oil production unit cost.

The NNPC boss had recently said that some oil firms in the country were producing at over $90 per barrel. The NNPC boss, however, pointed out that few companies such as Seplat would achieve the target of cutting down the production cost to $10/barrel by 2021. “When you come to the indigenous oil companies, and I have made an exception of Seplat and, of course, a few others, I can share with you that the highest cost of production that we have in this industry comes from companies operated by local oil firms. Unfortunately as it is, that is the reality,” he said.

He stressed that there was no way the country could sustain the current cost structure. “Some of our assets are producing oil in the excess of $45/barrel. It is simply not feasible in today’s circumstance. It simply means that probably you are subsidising the upstream, and, of course, nobody subsidises the upstream anywhere in the world. But that is what we are practically doing,” the NNPC boss said.

Kyari also stated that surprisingly, some multinational oil companies and partners of NNPC were also producing oil at completely unacceptable prices. He called for the enhancement of local skills in the sector, stressing that expatriates were so many in the industry and this often increased running cost.

He said there was a need to create adequate local skills in the Nigerian oil and gas sector. “Today, with all the best of our intentions, we still have significant inflow of expatriate skills and staff. This is not available in our industry; it is a very global industry. You cannot have all the skills but today you still need to work on this.

“So, by having local skills available you are able to reduce cost, you are also able to create wealth in communities where we work throughout the country and the continent. And this will contribute to economic growth, bringing down the cost of production and, of course, introducing more efficiency in our business,” he said.

By Chibisi Ohakah, Abuja


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