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