…As Saudi Arabia Produces At $10/Barrel
A new report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has indicated that Nigeria’s cost of producing crude oil has risen to about $40 per barrel.
The commission noted that rising production costs and the increasingly volatile global oil prices had made it difficult for Nigeria to remain competitive in the global oil and energy market
It clarified: “At an average of $25 and $40 production costs per barrel, the nation’s upstream oil production costs are among the highest in the world.
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“This range is significantly higher than production costs in top oil-producing countries like Saudi Arabia, where efficient operations allow for costs as low as $10 per barrel”, the NUPRC added
While expressing its concern about this high production costs, which is affecting Nigeria’s ability to attract foreign investment and favourably compete in the global oil market, especially when global oil prices drop, the commission maintained that the government was aware of the problem and had been adopting measures to address it and others undermining cost efficiency in the hydrocarbon resources industry.
The NUPRC reported: “For a long time, it has identified many factors contributing to the high production costs. Many facilities, pipelines, and storage systems are outdated, leading to frequent maintenance needs and operational inefficiencies. Modernising infrastructure to cut down on repair costs, extend asset life and bolster productivity is therefore crucial.
“Oil theft and pipeline vandalism are another setback that impacts operational cost in the sector. Nigeria understands it must develop urgent solutions to curb these menaces and continue to show its determination to address them. The enactment of the Petroleum Industry Act in 2021 marked a pivotal point in this regard,” the commission said.
“Since its emergence as the regulatory powerhouse in the upstream sector, the NUPRC has wasted no time in embracing the task of tackling existing challenges. In 2023, barely two years after its institution, it drew up a 10-year roadmap as a comprehensive strategy to revitalise and return the oil sector to its glory days.
“In 2024, in a shorter-term focus initiative under the broader decade-long Strategic Plan, the NUPRC effectively rolled out its Regulatory Action Plan with one of its key objectives being to lower the production cost per barrel of oil to at least $20”, it added.
The commission maintained that any oil industry without production cost efficiency as a core strategy cannot investments, retain higher profit margins, improve resilience during market fluctuations, and sustainable improve its output and contribution to the country’s Gross Domestic Product (GDP).
Noting that oil earnings account for around 90% of Nigeria’s export revenue, the NUPRC pointed out that a high cost of oil production posed risks to the country’s economic stability and growth.
On the benefits of cost-efficient oil production to Nigeria, the commission clarified: “Firstly, lowering production costs will make Nigeria’s oil sector a more appealing destination for foreign and domestic capital. This can inspire the country to compete more effectively with other oil-producing nations and retain a share of the global market. Similarly, by controlling oil production costs, oil companies can secure higher profit margins, even during periods of lower global oil prices.
“An increased profitability would ultimately benefit both operators and the sector, potentially leading to higher tax revenues and royalty payments. A combination of these factors can significantly boost Nigeria’s foreign exchange reserves and strengthen its resilience in the global oil market”, it added.
