According to the Group Managing Director of Nigeria’s National Oil Company, the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, Nigeria’s high crude oil production cost comes from local oil firms.

He disclosed this on Thursday 30th July 2020 during the Seplat Energy Summit 2020 webinar. He said some companies produced crude oil for as high as $45 per barrel.

He said for the country to sustain the cost structure in the oil sector, the high production cost must be reduced. According to the GMD, to his greatest surprise, some multinational oil companies who are partners of the NNPC were also producing oil at unacceptable prices.

He said only a few companies including the webinar host, Seplat, would achieve the target of cutting down production cost to $10 per barrel by 2021

The GMD also commented on the long-overdue Petroleum Industry Bill (PIB) saying he is hopeful that it would go through before the end of this year.

He stated that the country’s four refineries are down at the moment and the Corporation is working on fixing the refineries as Nigeria is importing almost every refined petroleum product that is used in the country. He noted that many licenses had been given to private investors for the establishment of refineries.

He said the gas sector was the only sub-sector that wasn’t adversely affected by the pandemic and tags it the future of the oil and gas sector.

The Minister of State for Petroleum, Timipre Sylva, gave the opening remark at the webinar and he mentioned that the government had rolled out strategies to reduce oil production unit cost, adding that there is a need to create adequate local skills in the country’s oil and gas sector.

Below are Excerpts from Kyari’s submission:

“When you come to the indigenous oil companies, and I’ve 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.”

“Some of our assets are producing oil in the excess of $45/barrel. It is simply not feasible in today’s circumstance.”

“It simply also 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.”

“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 that 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.”

“But I’m happy that we have transited into a deregulated market, which means that companies can now predict what will be the price of petroleum and they can now have basis for investment.”