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‘How to attain NNPC’s $10/barrel target’

‘How to attain NNPC’s $10/barrel target’

19 October, 2020

Experts at a Zoom conference last Wednesday have shown the way on how to attain the $10 cost per barrel of crude oil target set by the Nigerian National Petroleum Corporation (NNPC). But they fear that the 2021 date may be not be tenable, JOSEPH ESHANOKPE reports.

 

Is the $10 per barrel target set by the Nigerian National Petroleum Corporation (NNPC) achievable? Yes, say experts. But they disagreed that the 2021 date set for its take off might be unrealisable because it is too close.

The experts, who spoke at a Zoom conference organised by Pet Consult on Wednesday, were the Managing Director ODENL Mr Chijoke Akwukwuma; Regional Director, Security, Sub-Saharan, Africa, General Electric, George Kobani;  Assistant General Manager Supply Chain Management, Neconde Energy Limited, Mrs Gracetiti Fredson, and Country Chair, World Energy Council, Nigeria, Mr Salisu Isihak.

Explaining the theme of the event, which is: Driving the $10 cost per barrel narrative -push and pull approach,what works? the organiser, who is the Chief Executive Officer Pel Consult, Ezekiel Emeka Eboagwu, said it was aimed at removing the hurdles on the way of stakeholders in the oil and gas industry to make it better.

In June, NNPC’s Managing Director Mele Kyari announced at a webinar by the Nigerian Association of Explorationists (NAPE) that the corporation had fixed Unit Operating Cost of producing crude at $10 effective next year. He had warned: “Any company that does not operate at $10 per barrel cost of production by December 2021 will be shut down.”

He said the COVID-19 pandemic had brought a new normal, making the corporation to rethink the costs of production.

Later the Chief Operating Officer Ventures Business Development, NNPC, Roland Ewubare, explained : ”When you have a low commodity price register, the only way we squeeze out some reasonable cash and financial gain to the nation is by curtailing and constraining our costs in line with the GMD’s aspiration for a $10 per barrel cost of production. Against this backdrop, the conversation around cost becomes imperative and an urgent one.”

But the Chairman, Society of Petroleum Engineers (SPE) Nigeria Council, Joe Nwakwu, sought clarification on the issue. He had said: “$10 per barrel cost. I don’t know what that means. And I heard people talk about $10 per barrel. I really don’t know what it means. I need to do back and see what GMD (NNPC) was referring to – $10, is it the operating cost or total unit cost? So, we need to understand what that is.”

Kyari had insisted on cutting production costs, which he noted had been too high. He said some firms were producing at $90 per barrel, adding: ”This is unacceptable and the industry must work together to bring it down. There are no subsidies for upstream; if it is uneconomic, it must shut down.”

Last year, too, it would be recalled, the UOC for Venture Operating Companies was in excess of $10 per barrel, with some operators hitting $21.08 and $28.91 per barrel

Praising the initiative, Isihak said the target was achievable. Noting that the country’s crude could last another 50 years, he voted for the ‘push’ approach. He however added that this would mean more investments in technology and people. He hoped that the Petroleum Industry Bill (PIB) would speedy the target.

Akwukwuma also agreed. Describing the NNPC’s strategy as a ”welcome development’, he feared that it would be a tall order if we go by the achievements made so far in the industry.

He noted that it is cheaper to produce crude in Norway compared to Nigeria. ”They produce between 30 and 40 per cent cheaper,” he said, a reason he wants the government to focus more on getting its refineries back on stream. He said if the objective of cutting cuts is to create values, then it is wrong to refine crude abroad. “By this we are destroying values. It’s counter productive,”  he added.

Mrs Fredson, a Supply Chain specialist, also said the target is realisable. ”Everything thinkable is doable,” she philosophised.  She however noted the issues of corruption and automation as clogs in the way of the target. ”We are talking about costs. What about corruption?” she asked. Another problem she wants tackled is the prompt payment by clients. But the government, she urged,  should expedite action on the PIB.

Mrs Fredson, however, sought the need to employ those with multi-disciplinary skills. She said since every one wants to go global, there was the need for Nigerian firms to do go outside the country to execute jobs, as this has the merits of making them competitive and earning foreign exchange.

She advised that since COVID-19 has opened the eyes of everyone to the importance of remote staffing, she wants this vital window be used.

Both she and Kobani stressed the need for security, advising that we make Corporate Social Responsibility (CSR) an all-inclusive issue. For him, reduction in the cost of security would have a spiral effect on productions costs.

Moreover, he suggested that use of more community engagements, noting the deployment of the people would strengthen relationships and give them a sense of belonging.

 

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