Nigeria to Reduce Oil Production Cost to $27.55 Per Barrel

crude oil production

By Adedapo Adesanya

Nigeria is considering cutting the cost of producing a barrel of oil by at least five percent, the Minister of State for Petroleum Resources, Mr Timipre Sylva, has said.

The country has one of the highest costs of producing oil in the world at $28.99 per barrel compared with Saudi Arabia, which has the lowest cost at $8.98 per barrel while Iran and Iraq have their costs at $9.09 and $10.57 respectively.

Business Post reports that if this goal is achieved, the cost of production would be reduced by $1.45 per barrel to $27.55 per barrel.

Mr Sylva, speaking at the 9th edition of the Annual Practical Nigerian Content (PNC) Forum in Yenagoa, Bayelsa State, said that reduction in the cost of oil production was high in his priority for the industry.

Using the Nigerian content framework, the Minister said that he would enlist the support of local vendors to achieve this

He stated that while the government supports and encourages the patronage of local contractors, it would insist that the local vendors have an obligation to deliver premium services and support its strategy of using local content to drive down the cost of crude oil production, increase the contribution of the oil sector to the country’s Gross Domestic Product (GDP) and guarantee the security of oil production.

“In order words, we must not allow local content to become an excuse for cost overruns, slippages in project delivery schedule or shoddy jobs.

“As key stakeholders in the oil and gas industry, we must be aware that the entire country is looking up to our sector for increased revenue earnings to fund annual budgets and develop critical infrastructure,” he stated.

The Minister also explained that in addition to the industry being genuinely concerned that cost of production was the highest among OPEC countries, it must equally realise that high cost of production often affects the net revenue available to Nigeria from crude oil sales for development.

“We must, therefore, take practical steps to ensure that we curtail the various elements that contribute to the high cost of production,” he said at the event attended by stakeholders.

Mr Sylva said that with the achievements of the country in its local content policy, other African countries such as Kenya, Congo Brazzaville, Uganda, Gabon and Angola, who asked for the country’s template on local content practice and implementation, may adopt it.

He also said the government has broadened the implementation of the local content framework to other sectors of the country’s economy through the Presidential Executive Orders 03, 05 among others.

“We are also aware of the recent pledges by the local content committees of the Senate and House of Representatives to extend the Nigerian Content Act to other key sectors of the economy.

“This is because we can all see the benefits so far realised from the implementation of Nigerian Content requirements in the oil and gas industry,” he stated.

Sharing some other key priorities for the minister under him, Mr Sylva said they will be working towards the eradication of smuggling of PMS (petrol) across Nigerian borders; the completion of gas flare commercialisation programme; and the increase of crude oil production to three million barrels per day.

Other priorities include the passage of the Petroleum Industry Bill; increase of domestic refining capacity and implementation of the amended Deep Offshore and Inland Basin Production Sharing Contract Act.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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