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COVID-19 NEWSNigeria Targets $10 Per Barrel Cost of Production by 2021The Federal Government has made itsintention to fix the Unit Operating Cost(UOC) of producing crude oil in Nigeriato $10 per barrel.The Group Managing Director ofN i g e r i a N a t i o n a l P e t r o l e u mCorporation, Mele Kyari made thedisclosure on Wednesday during thesecond webinar series by the NigerianAssociation of Explorationists (NAPE),themed “The Impact of COVID-19 onthe Nigerian Oil and Gas Industry – TheWay Forward”. He said the reductionwould come into effect December2021.Evy MaffiniSpeaking on the impact and reaction ofNigeria’s to the COVID-19 crsisi, theNNPC boss said while Nigeria remainedresilient in the face of the Coronaviruscrisis, however, noted that the situationleft the country with revenueinstability.He hinted that the move for reductionin the cost of oil production is part ofthe government’s response to newrealities.Kyari said the cost of production havebeen too high for too long, adding thatgovernment had initiated theconversation on cost reduction withindustry operators but was stalled bythe Coronavirus outbreak.He noted that government’s industrywideintervention pointed to the needfor a substantial reduction in the cost ofproduction.He said “a number of cost elements wedeal with today shouldn’t be there inthe first instance. We can work on ourcost structure to bring down the cost ofproduction.“We are engaging our Joint Venturepartners on the areas of inefficiencythat they can do away with. Also, thereis need for adoption of technology toenhance productivity, reduce wasteand improve system efficiency,” he said.Speaking further, NNPC boss providedofficial data on upstream productioncost which revealed varying costs ofproduction by NNPC joint venturepartners. While some produced at $93per barrel in 2019, an unnamedoperator produced at $57 per barrel inthe 2020.Also, costs from production-sharingcontracts (PSCs) were lower. The highestcost of production from PSCs, which tend tobe offshore, came in at $35.97 per barrel,while the lowest was $6.18 per barrel, Kyaristated.He said, “Some companies are producing at$90 per barrel, while others are at $9. This isunacceptable and industry must worktogether to bring this down. There are nosubsidies for the upstream, if it is noteconomic it must shut down,”“It is not acceptable and this cannotcontinue. Our target is to bring it down to$10 per barrel by December 2021 and this isachievable.“Any company that does not operate at $10per barrel cost of production is free to gobecause the upstream sector is not asubsidised market, ” the NNPC boss said.Continuing, Kyari said “some of the oil andgas companies had over bloatedmanagement structures which impacted onthe production cost“We are going to do things very differently.“We need to focus on projects that generatemore cash, produce more resources – and atcheaper costs.”In another development, a report has saidthat Nigeria, Angola, Equatorial Guinea andCameron sustained their export of liquefiednatural gas (LNG) despite the economicturmoil triggered by the coronaviruspandemic. An analytical data from S&PGlobal Platts described exports from thelisted countries as showing ‘resilience,’during this period.GThe report said that total LNG exports from thefour exporting countries in the region, so far thisyear are broadly in line with volumes supplied inthe same time frame last year. That is despitesharp falls in LNG utilization rates in other partsof the world, particularly in the US, while spotexposedEgypt has halted LNG exportsaltogether.The Group Managing Director of Nigeria National Petroleum Corporation, Mele KyariNigeria is exposed to the spot market witharound 50% of its LNG exports last year sold ona spot or short-term basis, according to industrygroup, the International Group of LiquefiedNatural Gas Importers (GIIGNL). The reporthowever noted that Nigeria’s LNG exports in2020 have stayed strong despite weakerdemand and low prices, with some 11 Bcmexported in the first five months of the year.That is down just 4% on the same period lastyear. S&P Platt said some cargoes have takenlonger to reach their destinations, while otherloaded cargoes have been idling at sea in recentweeks, but nonetheless, exports continue out ofthe country’s only LNG plant, the 22 millionmt/year Nigeria LNG facility.“With supply to the Nigeria LNG facility beingassociated gas, LNG exports are to a degreedriven by domestic oil production, which PlattsAnalytics estimates fell by around 5% over thefirst five months of the year,” Platts Analytics’LNG analyst Luke Cottell said.“This meant we saw little change in LNG exportsyear on year, although a record volume ofNigerian LNG on the water in late May wasindicative of the difficulties such cargoes facedin finding a home amid record low prices in bothAsia and Europe,” Cottell said.11OIL AND GAS REPUBLIC I SPECIAL EDITION
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