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How To Reduce Costs Of Producing Oil In Nigeria – TotalEnergies

Country Chairman and Chief Executive Officer of TotalEnergies EP Nigeria Limited, Mr. Mathieu Bouyer has implored the Federal Government to ensure good fiscal incentives and healthy competition that will drive operating costs of production down 

The deep water segment of oil and gas industry in Nigeria has been stuck for 10 years since the Egina Final Investment Decision (FID), he said at an industry conference on Abuja recently. 

He blamed the gap on high operating costs and lack of contractors and competition in Nigeria. 

He said, many contractors had left the country and that has increased the lack of competition in the sector. He said there was need for the Federal Government to understand why they left and put some measures in place to bring them back. 

He added: “Even with the fiscal incentives, if the costs are too high, investment will not be possible, therefore, there is need for competition to drive the costs down. 

“As Capex are capped, arbitration are made. So it’s important to be competitive and agile to accommodate requirements”. 

He recalled that the Service Level Agreement (SLA) signed in September 2023 between NNPC and the international oil companies (IOCs) on contracting process SLA signed proved to be efficient on the Ubeta development project. 

Bouyer, said that Nigeria was gifted with a lot of oil and gas resources, saying the country has large deep-water industry with large resources developed and yet to be developed. 

According to him, TotalEnergies was a large operator in Nigeria’s deepwater space, with Egina and Akpo, and developed Usan for transfers operatorship. 

He maintained that all significant deepwater projects were developed with past contractual and fiscal conditions, noting that the deepwater segment in Nigeria has been stuck for 10 years since the FID on Egina project. 

Speaking on what was needed to move the Nigerian deepwater industry forward, Bouyer advised the federal government to replicate similar fiscal terms provided for Non-Associated Gas (NAG) development. 

He acknowledged the recent policy reforms of the government, particularly the executive order issued in March, being implemented through the Special Adviser to the President on Energy, Olu Verheijen, and NUPRC. 

The TotalEnergies’ CEO stated that owing to the executive order, the company and its partners managed to sanction the Ubeta project in June. 

According to him, “It shows that when a sound measure is taken, investment comes.” 

In a related development, Multinational energy company TotalEnergies stated that it acts as a key contributor to economic growth and tax revenues in the markets in which it operates, extending beyond its core oil and gas exploration and production activities. 

In 2023 alone, the company’s production taxes and current income taxes across all activities amounted to just over $24.7 billion, with an average tax rate of 38.2%. Additionally, its extractive entities paid $28.3 billion in taxes and production fees to the governments of the states and territories where it operates. 

In Africa, TotalEnergies has activities in over 40 countries, where it contributes to both economic and social development across its portfolio. 

In Uganda, TotalEnergies is spearheading the Tilenga and Kingfisher oil field development in the Lake Albert Basin – developed in partnership with China National Offshore Oil Corporation and the state-owned Uganda National Oil Company – which involves substantial investments in local infrastructure and community development. 

Last year, TotalEnergies EP Uganda selected 200 Ugandan youths for the Tilenga Massive Open Online Course and Tilenga Academy training program. 

The objective was to equip local youth with the knowledge and skills needed to work on the TotalEnergies-operated Tilenga project during its production phase, aiming to develop local capacity and encourage youth participation in the sector. 

Training was conducted at the Uganda Petroleum Institute in Kigumba and other international oil and gas training centers, providing hands-on experience during the installation and completion of the Tilenga project, which comprises nine oil fields, a processing facility, underground pipelines and infrastructure. Moreover, TotalEnergies is leading rural electrification efforts in the East African country, having built the 10 MW Soroti solar power plant that was one of the largest grid-connected, privately-funded solar plants in Africa at its commissioning. 

TotalEnergies serves as the largest operator in Angola, with interests in Blocks 17, 32, 0, 14 and 14K. Last May, the company announced FID for the Cameia-Golfinho field development, and anticipates the Quiluma and Maboqueiro gas fields to come online in 2026, which will feed into the country’s Angola LNG plant. 

The company holds a 41% market share and accounts for just short of 45% of Angola’s production, as well as holds key stakes in Angola LNG and the New Gas Consortium. Its substantial investments in Angola reflect the company’s historic contributions to the national economy through associated infrastructure development and export revenues, in addition to taxes, royalties and other levies. 

In neighbouring Namibia, TotalEnergies’ light oil discoveries with the Mangetti-1X and Venus-1X wells in the Orange Basin present a major economic boost for the country. 

Once fully appraised, these discoveries hold the potential to stimulate creation, local procurement and an influx of foreign investments from other international players, thereby enhancing Namibia’s economic growth and development. 

In Nigeria, the company’s activities extend beyond oil and gas exploration and production to renewable energy, electricity, green gas and retail activities. 

The company has over 1,800 employees in the country and 530 service stations. 

TotalEnergies also carries an interest in the Nigeria LNG plant and is pursuing several carbon-neutral initiatives, including the Zero Routine Flaring by 2030 programme. 

It also operates two lubricant blending plants and several petroleum product depots. Moreover, the company markets its products and services through its service stations and sells decentralised solar solutions to low-income populations. 

These activities have generated substantial income that flows through the country’s economy, as well as targets underserved communities. 

Across the continent, TotalEnergies conducts its operations under various contractual frameworks, typically either concession contracts or production sharing contracts (PSCs). Under concession contracts, the company owns the assets and facilities, receives all production, bears all risks and costs and pays royalties and taxes to the state. Under PSCs, the company finances and executes exploration and production at its own risk, receiving a share of the production to cover costs and profits, with the remainder shared with the state or national company. These agreements demonstrate TotalEnergies’ commitment to long-term business partnerships that profit the company and the host countries equally by sharing revenues and managing resources responsibly. 

SOURCE: Independent

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