Govt moves to reduce oil production cost to $10

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Govt moves to reduce oil production cost to $10
August 3, 2020

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The Federal Government is working towards attaining a $10 per barrel production cost sealing  in the oil and gas sector, the Minister of State for Petroleum Resources, Chief Timipre Sylva, has said.

Sylva, who stated this yesterday at the Seplat Energy Summit 2020 to mark its 10th Anniversary, said government  through the Nigerian National Petroleum Corporation (NNPC)  has rolled out strategies to achieve $10/bbl unit operating cost without jeopardising growth.

Sylva, who was a special guest of honour at the virtual summit, said the government had embarked on aggressive capital allocation to priority projects with low cost of production. 

He listed measures to be taken to include renegotiation of contracts to achieve a minimum 30 per cent cost reduction, downward renegotiation of all contracts and other business obligation.

He said government has embarked on diversification of portfolio to non-oil businesses to cushion the effect of the future crash in crude oil price. “We have declared this year 2020 as “the year of Gas” and have commenced the National Gas Expansion Programme (NGEP). On Jan. 16, we inaugurated an Inter-agency Committee saddled with the responsibility of coordinating our concerted efforts to ensure the penetration of domestic utilisation of LPG, encourage auto Liquefied Petroleum Gas, Compressed Natural Gas and Liquefied Natural Gas for the domestic market. 

This will drastically reduce the massive outflow of the nation’s foreign exchange currently being expended in the importation of Premium Motor Spirit (PMS),” he said.

On COVID-19 impact on the industry, Sylva said the pandemic has caused a demand-supply imbalance, revenue decline due to low oil price, as well as a decline in demand of crude oil due to the global lockdown, adding  that the pandemic has caused pressure on Nigeria’s crude oil selling price due to supply glut and lack of buyers and production uncertainties due to refineries shutdowns in major refining centres across Europe and Asia. 

“The huge revenue lost due to sheer drop in oil price arising from supply-demand imbalance has significantly impacted the Nigerian economy due to budget deficits and delivery challenges, project slippages and job losses in the private sector.

He praised the management and entire staff of Seplat for the phenomenal achievements and remarkable successes in the Nigerian oil and gas sector.

“It is worthy to state here that SEPLAT was awarded some divested assets based on the Federal Government’s aspiration to develop indigenous capacity in the Nigerian Oil & Gas sector about 10 years ago. And over the past 10 years, Seplat has recorded monumental achievements and have grown to become a leading independent upstream Oil and Gas company in Nigeria,” Sylva said.

He called on other indigenous oil and gas companies to emulate the company’s footsteps for enhanced growth and development. Mr Mele Kyari, the Group Managing Director, NNPC, reiterated government’s target to boost crude oil production to three million barrels per day.

Kyari said that the significance of the oil and gas business in the continent was huge and could not be neglected.