The Minister of State for Petroleum Resources, Mr. Timipre Sylva, has said he is aiming to cut the cost of producing a barrel of oil from Nigeria by at least five per cent during his tenure as a minister in Nigeria’s oil industry.
Reports indicate that Nigeria at $28.99 per barrel has one of the highest oil production cost amongst its Organisation of Petroleum Exporting Countries (OPEC) peers.
Saudi Arabia reportedly has the lowest quoted to be $8.98 per barrel while Iran and Iraq have their costs at $9 and $10 respectively.
But speaking at the 9th edition of the Annual Practical Nigerian Content (PNC) Forum in Yenagoa-Bayelsa, Sylva noted that reduction in production cost of oil was high in his priority for the industry.
He said he would enlist the support of local vendors within the Nigerian Content framework to achieve this, adding that the industry should be worried by such high production cost.
“Permit me to share with you the key priority areas we will be pursuing in the ministry for petroleum resources under my watch: they include the eradication of smuggling of PMS (petrol) across Nigerian borders; the completion of gas flare commercialisation program; increase of crude oil production to three million barrels per day and reduction of the cost of crude oil production by at least five per cent.
“Other priorities include the passage of the Petroleum Industry Bill; increase of domestic refining capacity and implementation of the amended Deep Offshore and Inland Basin Production Sharing Contract Act,” Sylva said in a text of his remarks which was sent to THISDAY.
He also stated that while the government supports and encourages the patronage of local contractors, it would insist that the local vendors have an obligation to deliver premium services and support its strategy of using local content to drive down the cost of crude oil production, increase the contribution of the oil sector to the country’s Gross Domestic Product (GDP) and guarantee the security of oil production.
“In order words, we must not allow local content to become an excuse for cost overruns, slippages in project delivery schedule or shoddy jobs.
“As key stakeholders in the oil and gas industry, we must be aware that the entire country is looking up to our sector for increased revenue earnings to fund annual budgets and develop critical infrastructure,” he stated.
The minister explained that in addition to the industry been genuinely concerned that cost of production was the highest among OPEC countries, it must equally realise that high cost of production often erodes the net revenue available to Nigeria from crude oil sales for development.
He added: “We must therefore take practical steps to ensure that we curtail the various elements that contribute to the high cost of production.”
Sylva equally stated the government’s delight with the achievements of the country in its local content policy and claimed that such achievements are now well recognised in some African countries such as Kenya, Congo Brazzaville, Uganda, Gabon and Angola who have asked for Nigeria’s template on local content practice and implementation.
He also said the government has broadened the implementation of the local content framework to other sectors of the country’s economy through the Presidential Executive Orders 03, 05 and others.
According to him: “We are also aware of the recent pledges by the local content committees of the Senate and House of Representatives to extend the Nigerian Content Act to other key sectors of the economy.
“This is because we can all see the benefits so far realised from the implementation of Nigerian Content requirements in the oil and gas industry.”