NNPC’s production costs muddle

22 August 2017, Week 33, Issue 703

Differing opinions on Nigeria’s production cost from Nigerian National Petroleum Corp. (NNPC) underscored problems within the company’s understanding. 

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National Petroleum Investment Management Services’ (NAPIMS) head, Dafe Sejebor, was reported as saying production costs in the country had fallen to US$23 per barrel, from US$78 per barrel in August 2015. As a result he said, the savings, covering both production-sharing contracts (PSCs) and joint ventures, were around US$3 billion in the upstream. 

Sejebor went on to say it intended to bring onshore costs down to US$17 per barrel, and offshore to US$19. NAPIMS is a unit of NNPC and is charged with overseeing PSC and joint venture operations in the country. 

NNPC put out a statement on Sejebor’s comments on August 16. Nigerian Minister of State for Petroleum Resources Ibe Kachikwu also commented on production costs last week, saying these were around US$32 per barrel and that it was intended to reduce them to US$15 per barrel. 

Adding further confusion to the issue, NNPC’s managing director, Maikanti Baru, in an address to the staff in early July said operating costs had been reduced from US$27 per barrel to US$22 per barrel. 

While production costs will have come down in recent times, as companies focus on cost savings and efficiencies, Sejebor’s quote of US$78 per barrel number seems outlandish. 

Providing a single number at which a barrel of oil can be produced in Nigeria will always be a challenge, given the variety of fields and developments in the country – from the deepwater, shallow-water, swamps and onshore. There will, though, be a single number, no matter how poor a metric it would be. That NNPC and the government cannot agree on one is a telling sign. 

 

Edited by

Ed Reed

Editor

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