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Some oil companies in Nigeria producing oil at $93 per barrel –NNPC

The Nigerian National Petroleum Corporation (NNPC), has revealed that a number of its partners are producing oil in Nigeria at $93 per barrel.Mele Kyari, the Group Managing Director of the state-owned corporation made the disclosure on Wednesday during his presentation at a webinar organised by the Nigerian Association of Petroleum Explorationists.

According to him, a lot of oil firms operating in the country incur personnel costs that are not sustainable under the present market realities.

Solomon Adeola, Chairman Senate Committee on Finance, last week requested the NNPC, represented by its Upstream Chief Operating Officer, Yemi Adetunji, to explain why it was planning $21 as production cost per barrel when the new benchmark proposed in the revised budget was $25 per barrel.

“We want you (NNPC) to take us through why Nigeria’s cost of production per barrel of crude oil is the most expensive in the world by giving us the breakdown of what constitute those costs in to the variables and the technical cost and we want to know what you are doing as an agency of government to bring down this cost,” Adeola had said.

Kyari noted in his presentation yesterday that a number of actions were being taken to scale the cost of production in the oil sector to $10 a barrel.

“Some of our partners are producing oil at $93 per barrel. It is impossible. What it simply means is that you are subsidising this business; others are paying for it. And there are assets that are producing as low as $9 per barrel.

“You cannot explain this gap between one company producing oil at $93 per barrel and another at $9. It means the one that is producing at $9 is the one subsidising. It is unacceptable; this cannot continue, and the industry must work together to bring this down,” he said.

Kyari assured that the NNPC would not retrench employees in spite of the oil crash triggered by the coronavirus crisis.

He observed that the impact of the pandemic had been huge on revenue, which caused the corporation to run into a budget deficit.

“Many companies today have very high cost level, most of the costs are coming from personnel cost – unparalleled in the industry.

“When you compare our cost of manpower in this country to other jurisdictions, we know we have one of the highest in the upstream in relative terms.

“So, it is impossible to sustain this structure; the current cash flow cannot sustain it. So, we will not be surprised when companies consider the possibility of cutting down either numbers or the cost itself.”

Mr Kyari stated that many of the cost elements companies were dealing with were not necessary.

“COVID-19 has made us realise how many people we can do without, how many services we don’t have to live with, and the end result is that we can work on our cost structure so that we can bring down our costs and then sustain production.

“We need to also put measures in place to ensure cost discipline across businesses; we are engaging our partners across all assets, from the production sharing contracts to the joint ventures. The reality is that today’s costs are unrealistic; some assets produce in the excess of $40 per barrel.”