- NNPC to Reduce Production Cost of Crude oil to $10 Per Barrel
The Nigerian National Petroleum Corporation (NNPC) has said it is working on reducing the cost of producing a unit barrel of crude oil to $10 across oilfields in Nigeria.
According to Mallam Mele Kyari, the Group Managing Director, NNPC, the plunge in global oil prices below production cost has led to the closure of oil rigs and weak investment in the industry across the world.
However, NNPC has continued to produce crude oil in order not to lose market share to competitors with more competitive pricing.
He explained that nations like Saudi Arabia have managed to reduce production costs to about $4 to $5 per barrel, while Nigeria’s cost of production remains between $15 to $17 per barrel.
With crude oil trading at $12 per barrel or even $15 in March and most part of April, it means the nation was selling at a loss.
He said, “Oil price collapse below cost has led to production deferment across the world. The NNPC has however maintained steady production in order not to lose market share in the event of crude oil price recovery.
“Instead, the NNPC has taken aggressive capital allocation to prioritise low-cost oil production and additional measures to ensure cost discipline including renegotiation of contracts downwards and other business obligations, thus saving 40 per cent of the proposed budget and cost.”
Kyari added that the NNPC had rolled out strategies to achieve production cost of $10 per barrel across the nation’s upstream operation without sacrificing growth for innovation.
The corporation’s performance report for the first quarter of 2020 “highlights the need for further costs optimisation as the UOC figures are above the target of $10 per barrel in all cases.”