Nigeria to save $31.4bn on crude oil production

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By Adewale Sanyaolu and Uche Usim, Abuja

Nigeria is to save a whopping $31.4 billion yearly  on reduced cost of crude oil production, which peaked at $70 per barrel in 2014.

Speaking yesterday at the 14th Annual Aret Adams Memorial Lecture, with the theme“Find More, Produce More”   held in Lagos, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr.Maikanti Baru, said the Corporation’s  Unit Technical Cost (UTC) has significantly dropped from above $70 per barrel in 2014, to about $27 per barrel, as at year end 2016.That gives the country a saving of $43 per barrel daily.

When $43 is multiplied by two million barrels per day, according to latest production figure reeled out by the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu,Nigeria will be saving about $86 million per day or $31.4 billion yearly.

Baru, who was represented by the Chief Operating Officer, Gas and Power, Engr. Saidu Mohammed, said NNPC was committed to further driving down the UTC

He equally disclosed that NNPC has renegotiated its deep offshore rig-rate from a staggering $580,000 to $164,000 per day, saving the country about 71.7 per cent cost of executing similar operations in the past. He added that the Corporation has achieved about 35 per cent downward review of rig rates per day for both swamp and land operations in its portfolios.

A rig rate is a major cost element incurred by an Exploration and Production (E&P) company in the course of drilling for oil or gas in deep offshore, shallow offshore, swamp, land areas or basins.

Baru declared that the various reductions serve as an incentive for investors to grow reserves, increase profitability and improve Return On Investment (ROI), adding that they also boost government’s revenue, thus improving its commitment to developmental projects across the country.  The NNPC GMD, solicited the support of all industry stakeholders to achieve more of these lofty aspirations, since according to him, there was an urgent need to link the Industry with other sectors of the Nigerian economy.

Baru said although the increased oil production involved the cost factor and the commodity price, the Corporation had produced oil within the year with much efficiency.

“Price may not be readily under our control, but we need to manage cost of production within the Industry. Within the period we took over the reign of leadership in the Corporation, we have been able to drive down cost to a very commendable level.”The GMD explained that to achieve the 40 billion barrels of crude oil reserves and a production of 4Million barrels per day government’s aspiration by 2020, the country needs an incremental of at least 1billion barrels in reserves year-on-year till 2020, and at minimum, half a million barrels in incremental production capacity per day within the same timeframe.

“Considering our quest for revenue generation as a nation, it is a given that we need to increase our exploration efforts in order to sustain our reserve base and grow production,” he noted.

He charged industry stakeholders to invest in exploration activities, especially now that crude oil price is low “so that when the tide turns, all we would need to do is to turn on the taps.”

Baru said NNPC would continue to make investments that are geared towards increasing the national hydrocarbon reserves and daily crude oil & gas production, adding that in this respect, the Corporation was committed to propelling power, industrial and agricultural sectors, through an adequate provision of gas to power and sustainable feedstock to fertilizer and petrochemical industries.

In his opening remarks, the Chairman of the occasion and former Minister of State for Petroleum, Mr. Odein Ajumogobia, said there was no better time to discuss increased oil production than now.

Also speaking at the event, Chairman of the Aret Adams Foundation, Mr. Egbert Imomoh, said Nigeria should position itself for the future by finding more oil and producing more of the black gold.

This year’s Aret Adams Annual Lecture Series is the fourteenth, seeking to immortalize the lofty ideals of Chief Godwin Aret Adams who was former GMD of NNPC, and Adviser on Petroleum  to former Head of State, General Abdulsalami Abubakar between 2008 and 2009. Adams died 15 years ago.

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