Upstream Operators Urged To Reduce Production Cost To $10

Upstream operators have been urged to embrace cost reduction to achieve the $10 or less per barrel production cost target.

Mallam Mele Kyari, Group Managing Director, Nigerian National Petroleum Corporation (NNPC) made the call Tuesday at the launch of the Nigerian Upstream Cost Optimisation Programme (NUCOP) which held at the NNPC Towers.

A statement by the Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, said that the NNPC boss, while speaking at the event, held that the current reality global energy transition and demand erosion dictated by the Covid-19 pandemic had made cost optimisation imperative.

Kyari emphasises: “It is in our informed interest to optimise our cost of production. The realities of energy transition and investor choices are very much clear to us. There is nowhere in this world where a less cost-efficient operator can survive today”.

While calling on industry players to adopt such measures as transparency, collaboration, efficiency and shared services to help in driving down cost in order to meet the target; Kyari disclosed that under the NNPC operational theme for the year known as ‘Execution Excellence’, the Corporation would achieve a contracting cycle of six months or less which would help create efficiency and drive down unit operating cost to sub $10 per barrel level.

In his address, the Minister of State for Petroleum Resources, Chief Timipre Sylva, stated that the current average cost for Joint Venture production was below $30 per barrel while that of Production Sharing Contract (PSC) production was below $20 per barrel. These costs he insists needed cost optimization in order to keep the oil and gas industry afloat in Nigeria.

“Today’s engagement with industry stakeholders, under the NUCOP, is part of the resolve of this administration to confront this challenge of high production cost. I expect robust discussions and a realistic roadmap to achieve the cost optimisation objectives,” Sylva stated.

In his goodwill message, the Chairman, Senate Committee Upstream, Senator Bassey Akpan, said the 9th National Assembly would pass the Petroleum Industry Bill (PIB) to provide a conducive environment for all operators in line with global best practices.

Leaders of agencies, trade groups and labour unions in the Oil and Gas Sector such as the Nigerian Content Development and Monitoring Board (NCDMB), Oil Production Trade Section (OPTS), Independent Petroleum Producers Group (IPPG), Petroleum Technology Association of Nigeria (PETAN), Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) who spoke at the event described the initiative as a welcome development and pledged their support for NUCOP.

NUCOP is an industry-wide initiative designed to optimize Nigeria’s upstream operating expenses through process enhancement and industry collaboration to ensure improved and sustainable profitability for all stakeholders.