FG says $30/barrel crude oil production too high, no longer acceptable

 

BY OUR EDITOR

The Federal Government, Tuesday, insisted that the high cost of crude oil production in Nigeria would no longer be tolerated, while it called for an urgent reduction in the cost from the current $30 per barrel to around $10 per barrel.

Speaking at a seminar organised by the Petroleum Technology Development Fund, PTDF, in collaboration with the Quantity Surveyors Registration Board of Nigeria, QSRBN, Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed that cost of crude oil production in Nigeria was still one of the highest in world.

According to Sylva, in the regime of $50 to $60 per barrel price of crude oil, a cost of over $30 per barrel is unsustainable and that is why we need to come up with what we need to do to reverse the trend.

He said, “The cost of crude oil production in the 80s/90s was around $4 per barrel, in the early 2000, it was between $5 and $6 per barrel, while today, it is over $35 per barrel. It is interesting to note that some countries like Kuwait and UAE are producing at less than $10 per barrel.

“In other words, the need to achieve effective cost management in the oil sector is an urgency of yesterday.”

According to VANGUARD online report, Sylva, who was represented by Chief of Staff Engr. Moses Olamide, explained that the Federal Government, in realisation of the urgency of the situation, had set up a committee, headed by the Permanent Secretary of the Ministry of Petroleum Resources, to come up with solutions that would bring about a significant reduction in the cost of crude oil production and also crash the contracting cycle in the oil sector.

He added that the Federal government had set a target, through an industry policy document to reduce the cost of crude extraction by at least 30 per cent.

Sylva noted that the document recognised that it was imperative to cut production cost, reduce contract approval cycle, and ensure transparency, reduce regulatory transaction cost among others.

The minister, however, identified factors driving production cost to include insecurity in the oil-producing regions, improper governance structure, fiscal policies, local content issues, bureaucracy, overlapping national oil company functions and corruption among others.

He said, “Effective cost management in the oil and gas is particularly important, given the strategic importance of the sector as the main stay of our nation’s economy.  This necessitated the dire need of managing the cost of production of crude oil which will eventually shore up revenue allocation to execute the government projects, as well as fast tracking inter-sectorial linkages to enhance value creation.