…Threaten to cancel expensive JV contracts
The Nigerian National Petroleum Corporation (NNPC) has said that the high cost of production by partners in the industry would no longer be acceptable, and threatened to cancel some of its expensive Joint Venture (JV) contracts.
Speaking at a webinar organised by the Nigerian Association of Petroleum Explorationist (NAPE), titled: ‘The Impact of COVID-19 on the Nigerian Oil and Gas Industry-The Way Forward’, the managing director of the NNPC, Mallam Mele Kyari, also warned contractors, suppliers and companies against inflated and unrealistic contract figures.
‘‘The era of some of our partners producing at a very high cost will no longer be acceptable to us anymore. It is either they become more efficient at what they are doing by cutting cost or be ready to be shown the way out. If they are not ready to be cost effective, then we may have no other option than to cancel those contracts and give them to those that can manage and produce at a relatively cheaper cost. This is business and we cannot afford to run same like a charity organisation,” he said.
Kyari frowned at the activities of some local and international partners who he said are producing oil at a very high cost of about $93 per barrel while some others are producing same at a relatively cheaper cost. He accused the LOCs as engaging more in this unwholesome act.
He noted that every cost on the list of business has a premium that is related to the country’s operating environment, insisting that those premiums are much more exaggerated and not reflective of the realities on ground because suppliers, contractors and companies were only taking advantage of such to hike contract cost.
He identified some factors to be responsible for high cost of production. They include; structural inefficiencies that exist in the system and processes, environmental factors which every contractor factors in while doing business; be it risk as it relates to human resources and materials.
The NNPC GMD said the current vision is to achieve a $10 per barrel industry cost, adding that for these to happen companies must do so many things to arrive at that cost. According to him, part of what should be done to achieve that target is for stakeholders to be more cost conscious, plan better, more realistic, and prudent and the appropriate leadership to drive the focus.
He assured that the attainment of a $10 per barrel by 2021 was possible; adding that such would enable the country to meet its three million barrels per day (bpd) and 40 billion oil reserve targets in a seamless manner.
Chibisi Ohakah, Abuja
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