Page 4 - AfrOil Week 24

AfrOil COMMENTARY AfrOil

Nigeria’s cost considerations

NNPC is pushing to bring the cost of production down from highs of more than $90

per barrel, and it sees local partners’ personnel expenses as a major part of the problem

ALTHOUGH world oil prices have regained Solomon Adeola, a member of the commit-
some ground since later April, they are still low tee, drew particular attention to the firm’s pro-
WHAT: enough to worry the governments of oil-pro- duction cost structure.
NNPC says some Nigerian ducing states – especially since there is no guar- He asked Yemi Adetunji, NNPC’s chief oper-
operators are overstating antee of when or whether fuel demand might ating officer for upstream operations, to explain
their expenses and return to the levels reported before the corona- why the company’s budget estimated that pro-
pushing production costs virus outbreak. duction costs would average $21 per barrel,
as high as $93 per barrel. Nigeria, as the largest oil producer in Africa, given that Nigerian crude has been selling at a
shares those worries. The fall in global oil prices price of around $25 per barrel.
WHY: and energy consumption has forced the federal “We want you [NNPC] to take us through
These high costs are government to scale down its plans for this year, why Nigeria’s cost of production per barrel of
a drag on Nigeria’s oil and officials in Abuja are trying to figure out crude oil is the most expensive in the world
sector, which has been hit how exactly to do that. Within the framework by giving us the breakdown of what constitute
hard by recent events. of this process, they are taking a closer look at those costs in to the variables and the technical
production costs. cost, and we want to know what you are doing
WHAT NEXT: as an agency of government to bring down this
Foreign and local Show us the money cost,” Adeola declared.
companies want NNPC Earlier this month, the Senate’s finance com- He was speaking shortly after Mele Kyari, the
to consider their security mittee practically demanded that state-owned group managing director of NNPC, spoke pub-
costs and introduce more Nigerian National Petroleum Corp. (NNPC) licly about his desire to bring production costs
investor-friendly policies. open up its account books. down.

P4 www. NEWSBASE .com Week 24 17•June•2020