Petroleum Engineers Seek Clarity on Proposed $10 Oil Production Cost

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Peter Uzoho

Petroleum engineers in the country are seeking clarification on how the federal government intends to achieve the planned reduction of crude oil production cost to $10 per barrel.

The Chairman of Society of Petroleum Engineers (SPE) Nigeria Council, Mr. Joe Nwakwue, said yesterday that while it is necessary to reduce the cost of oil production in the country, the operators do not understand the specifics in the planned $10 per barrel cost.

Speaking in Lagos at a press conference ahead of the upcoming SPE Nigeria Energy Industry Transformative Summit (NEITS) holding next week, Nwakwue said the Nigerian National Petroleum Corporation (NNPC) needed to clarify whether the said $10 was for Operating Cost (OPEX) or technical cost.

The Group Managing Director of the NNPC, Mr. Mele Kyari, had repeatedly expressed the optimism that the corporation would achieve $10 oil production cost by 2021, citing the mismatch between crude oil production cost and the selling price, and the losses arising from that.

“$10 per barrel unit cost – I don’t know what that means, and I have heard people talk about $10 per barrel. I really don’t know what that means.

“I need to go back and see what the GMD (NNPC Group Managing Director) was referring to – $10, is it the operating cost or total unit cost. So, we need to understand what that number is,” Nwakwue said.

He, however disclosed that SPE is a member of the Presidential Committee on Reduction of Cost and Project Cycle Time, and that there is an ongoing conversation among the committee members with respect to cost reduction.

He added that the committee had advanced its work on oil production cost reduction and other duties it is saddled with, insisting that the actual unit cost reduction should be clearly explained to them.

Nwakwue said: “However, I will tell you, SPE is a member of the Presidential Committee on Reduction of Cost and Project Cycle Time. So there is a conversation going on at that level and we have made our suggestions on what can be done.

“But the most important thing is that, overall, I think the industry, government, everybody recognised the desire to reduce cost, and that the committee has advanced work along those lines. So there is a lot of work being done to bring down cost.

“But I don’t know what specifically he (Mele Kyari) was referring to when he said $10. Is that unit OPEX (Operating Cost) or unit Technical Cost? We need to understand what that $10 is. I won’t be able to say because I haven’t seen any document that basically addresses that.

“But overall, the industry as a whole, the ministerial committee is in place, they are still working and they are taking item by item, what needs to happen to reduce cost and reduce cycle time; because that’s another major cost driver; and they are looking at approval cycles, and all sorts of thing are going into that”.

Meanwhile, the maiden edition of SPE Nigeria Energy Industry Transformative Summit (NEITS) has been slated to hold virtually from August 25 to 27, 2020.

The summit, with the theme: “Changing Global Energy Landscape: Strategies for Industry Sustainability,” will be attended by the duo of the Minister of State for Petroleum, Chief Timipre Sylva; and the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, alongside many industry stakeholders home and abroad.