NNPC makes move to address high cost of production



    By Simon Ugwu, The Nigerian National Petroleum Corporation, NNPC, has made move to address the high cost of production.

    The Group Managing Director, NNPC, Mele Kyari made this known at the third Webinar Series organized by Nigerian Association of Petroleum Explorationists, NAPE with the theme: “the Impact of COVID-19 on the Nigerian Oil and Gas Industry -the Way forward”.

    “What we did was to look at how we can address the issue. So we decided to look into projects together to see how we can work together to reduce cost, the conversation was going on then COVOD -19 came and threw the challenges at all of us that oil can now sell around less at $10 per barrel”, he stressed.

    “We cannot continue in business unless something is done about the cost and it became a very clear opportunity for us to hype our engagement with our partners. So we have an industry that knows that cost must come down. The result today is that there is structural shift from what we used to do to where we are going today”, said the GMD.

    According ton him, “When we took charge, we knew all along that our cost of production was very high. Such cost is not acceptable, as a result of lots of factors including structural inefficiencies in our processes”.

    “There are also issue of environmental consideration. Contractors will factor all associated risks for doing business here in terms of human resources, materials or whatever you can think of. Every cost has a premium that’s related to our environment. Those premiums are so exaggerated, it is not true. Suppliers and contractors have taken advantage of it to hype the cost in this country and that’s the reality”, maintained thee GMD.

    The Corporation flashed a $10 per barrel cost of production warning cards to all oil and gas producing companies in Nigeria.
    NNPC insisted that any company that refuse to cut down cost to this level will be shown the way out of the industry.

    “We have become transactional industry. People are bothered about putting contracts in place, without worry about what is the end value of this. To that effect specifically, regarding our local oil companies, they have the least governance structure, processes are not clearly significant and it has a way of wiping on the IOCs and the end result is what we are seeing today which is producing cost beyond its cost”.




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