Abuja, Nigeria | – The Federal Government of Nigeria is set to compel international oil companies (IOCs) to cut the cost of producing oil in Nigeria.
Minister of State for Petroleum Resources, Dr. Emmanuel Kachikwu, who confirmed the plan said at the present low price of crude oil, it makes economic sense to cut cost.
Consequently, he stated that the cost, which the National Petroleum Policy put at $28.99 per barrel, would be reviewed downward with the IOCs in order to arrive at an acceptable cost.
He stated: “The nation needs to review the current high cost of producing oil. It does not make sense to produce oil at such high cost, especially now that crude oil price has dropped from over $100 to $50 per barrel.
“It will not make sense to produce at high cost anymore. We will sit with the IOCs to look at the cost elements in order to take a better decision. It is in the best interest of everyone to bring down the high cost of producing oil in Nigeria.”
The National Petroleum Policy, gave a breakdown of the current production cost as follows: $8.81, $13.19, $4.11 and $2.95 as production costs, capital spending, gross taxes and admin/transport per barrel respectively.
The policy which identified Nigeria as one of the most expensive oil provinces in the world, added that oil price has been very unstable in recent times.
Kachikwu said further: “There has also been extreme volatility of oil and gas prices since around 2005, at levels not seen since the 1960s. Prices went down dramatically as US shale production took off.
“Two clear messages for Nigeria are that it has to broaden the economy towards a gas based industrial economy; and within the oil sector, Nigeria has to move downstream into the value added sectors of refining and petrochemicals.”