Nigeria targets $15/barrel cost of oil production
Nigeria is targeting to further reduce the cost production of a barrel of oil to $15/bb barely a week after the Nigerian National Petroleum Corporation (NNPC) said it has driven cost down to $23/bb.
In a speech delivered at the Association of Energy Correspondents of Nigeria, (NAEC) conference that held in Lagos, last Thursday, Ibe Kachikwu deputy minister, of petroleum resources said that the cost of oil production was at about $32/barrel, conflicting with NNPC’s claim that it had been reduced to $23/bb.
“In Nigeria today, the situation is such that foreign direct investment flows into the country are at high cost. An example is the high cost of production of oil at about $32/barrel,” Kachikwu said in an address.
He further said, “Initiatives to reduce the cost of crude oil production to $15/barrel are ongoing; initial consultations with stakeholders have held and cost drivers have been identified. The outcome of this initiative would be a win-win for investors and the nation.”
Just as the NNPC failed to give details on the consultations that is driving down the cost of oil production, Kachikwu too did not elaborate on what strategies was followed to reduce the cost of oil production.
International Oil Companies (IOCs) have always cited insecurity in the Niger Delta characterised by kidnapping for ransom of foreign oil workers, destruction of oil assets and agitations by different factions of militants as part of the reason the cost of production of a barrel oil in Nigeria is among the highest in the world.
Many OPEC countries like Saudi Arabia, Iran and others produce oil at cost below $10 thereby limiting the effect of volatile oil prices but Nigeria’s oil income rises and falls according to the tide oil prices.
IOCs also blame uncertain government prices for the high cost of oil production. Nigeria has failed to articulate a national strategy for engaging its oil production hence different administrations enact policies that contribute to instability in policy environment. This has led to abrupt contract cancelations and high rate of corruption in the sector.