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Market Digest Nigeria

Economy

Buhari’s Govt To Cut Oil Production Cost To $10 inline with UAE, Kuwait

The federal government has taken steps to bring down the cost of producing a barrel of crude from $30 to less than $10 per barrel as obtained in countries such as Kuwait and the United Arab Emirates (UAE).

Describing the current high cost as no longer sustainable, the government has mandated a committee headed by the permanent secretary of the Ministry of Petroleum Resources to undertake the task with immediate effect. Apart from working out modalities to reduce the crude oil production cost, the committee is also expected to crush the contracting cycle in the oil sector.

The minister of state for Petroleum Resources, Chief Timipre Sylva, unveiled the government’s plan yesterday in Abuja at a conference on “Effective Cost Management In The Oil and Gas Sector,” organised by the Quantity Surveyors Registration Board of Nigeria (QSRBN) in collaboration with the Petroleum Technology Development Fund (PTDF) in Abuja. While charging the participants to evolve practical measures to ensuring that the government meets the target, Sylva said that “in a regime of $50-$60 per barrel as price of crude oil, a cost of over $30 per barrel is unsustainable and that is why we need to come up from this programme with what we need to do to reverse the trend. In other words, the need to achieve effective cost management in the oil sector is an urgency of yesterday.”

Represented at the event by his chief of staff and senior technical adviser, Mr. Moses Olamide, the minister stated that shortly after he was appointed and inaugurated into office, President Muhammadu Buhari mandated him to reform the sector with the aim of ensuring transparency and accountability, restoring public and investors’ confidence, as well as set a framework to change the pace of managing and administrating the industry based on global best practices. Sylva said that the task before him reinforces the need for innovative policy interventions that can quickly be introduced and implemented with potential for high positive impact. He described the collaboration between QSRBN and PTDF which led to the conference as one of such innovations. The minister, therefore, charged the participants to suggest better ways of achieving effective cost management in the Nigerian oil and gas sector.

Minister of Works and Housing, Mr Babatunde Fashola (SAN), told the conference that the oil and gas sector is very central to the growth and prosperity of Nigeria, stressing that the workshop which is aimed at transforming the sector by addressing its high cost of production, is a welcome development. Fashola said that the present administration places a high premium on projects and administrative cost reduction, adding that “organising a workshop on effective cost management in the oil and gas sector is in consonance with the “Next Level” agenda of the government and being in tandem with value-for- money in the operation of the sector.”

Earlier in his welcome address, the executive secretary of PTDF, Dr. Bello Gusau, stated that the conference couldn’t have come at a better time than now, as the cost of exploration and production of crude oil has increased exponentially with the attendant decline in government and producers’ revenues. He listed cost engineering, cost control, cost estimating and cost management as some of the challenges facing the industry in Nigeria, noting that the collaboration was designed to proffer solutions to them. Gusau said that the PTDF is willing to partner with other agencies in finding solutions to the critical issues affecting the realisation of government’s vision for the sector.

 

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