Nigeria’s cost of oil production is unsustainable – Minister

Timipre Sylva

Nigeria must do all within its powers to reduce the cost of crude oil production to help boost revenue generation for economic growth and national development, the Minister of State for Petroleum Resources, Timipre Slyva, has said.

Mr Sylva, who spoke at a seminar on effective cost management in the oil and gas sector in Abuja on Tuesday, said the current production cost of over $30 per barrel in Nigeria was not sustainable.

The minister was represented by his Chief of Staff, Moses Olamide.

The seminar was organised by the Petroleum Technology Development Fund (PTDF) in collaboration with the Quantity Surveyors Registration Board of Nigeria (QSRBN).

“Let me go back memory lane. The technical cost of crude oil production in the 1980s/90s was around $4 per barrel. In early 2000, it was between $5 and $6 per barrel. Today, it is over $35 per barrel.

“It is interesting to note that some countries, like Kuwait and UAE, are producing at less than $10 per barrel.

The minister said in the regime of $50/60 per barrel price of crude oil, a cost of production of over $30 was unsustainable, adding that was why Nigeria needs to come up with the idea on what needs to be done to reverse the trend.

The minister said Nigeria, the largest economy in Africa with a gross domestic product (GDP) of about $400 billion and a population of over 180 million needs aggressive industrialisation and economic diversification.

In spite of the quest for economic growth and great investment opportunity in the oil and gas sector, Mr Sylva said the cost of crude oil production in Nigeria remained one of the highest in the world.

He said the government had set the target through an industry policy document to reduce the cost of crude oil extraction by at least 30 per cent.

The document, he said, recognised that to cut production cost, reducing contract approval cycle, promoting transparency, and regulatory transaction cost, among others, were imperatives.

“Currently, there is an industry committee headed by the Permanent Secretary on the reduction of crude oil production cost and crashing of contracting cycle in the ministry,” he said.


While commending PTDF and QSRBN for organising the workshop, the minister urged the Quantity Surveyors and Cost Engineers to deploy the principles of total cost management and come up with a solution on how to minimise the impact of cost drivers.

He named the drivers to include corruption, national body policies, infrastructure deficit, bureaucracy, regulatory issues, insecurity in the oil-producing areas, among others.

The minister urged the engineers to always come up with ideas on how to better achieve effective cost management in the oil sector.

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Meanwhile, the Minister of Works and Housing, Babatunde Fashola, said the oil and gas sector was one of the most important sectors in Nigeria’s economy as it contributes about 10 per cent to the national GDP.

Mr Fashola said President Muhammadu Buhari’s administration placed a high premium on projects and administrative cost reduction, adding that organising the seminar was in consonance with the next level agenda of the present administration.

“The involvement of Quantity Surveyors in oil and gas sector, such as exploration, pipelines installation, road, bridges, building, heavy engineering services with other professionals will ensure efficient allocation and utilisation of resources, probity, value for money in our infrastructural development in Nigeria,” the minister said.

Also, the Executive Secretary of PTDF, Bello Gusau, said in the fund’s industry skill and competency gap analysis, issues of cost engineering control, estimating was among the areas of greatest challenge in the oil sector.

He assured that the PTDF was willing to partner and collaborate with the industry to find the solution to critical issues affecting the full realisation of government vision for the oil and gas sector.

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