The Nigerian National Petroleum Corporation, NNPC, has successfully renegotiated the cost of its deep offshore rig-rate downwards by about 71.7 per cent.

The Group Managing Director of the corporation, Maikanti Baru, said Nigeria was saved the huge burden of the cost of operation in the difficult terrain from the previous charge of about $580,000 to about $164,000 per day.
Mr. Baru, who was speaking in Lagos at the 14th Annual Aret Adams Memorial Lecture, said similarly, the NNPC achieved a 35 per cent downward review of rig rates per day for both swamp and land operations in its portfolios.
A rig rate is a major cost component incurred by an exploration and production company in carrying out drilling operations for oil and gas in deep offshore, shallow offshore, swamp, land areas or basins.

Mr. Baru, who was represented on the occasion by the Chief Operating Officer, Gas & Power, Saidu Mohammed, said these reductions were also effected in NNPC’s unit technical cost, UTC, over the period.

The various reductions, he said, served as incentive for investors to grow reserves, increase profitability and improve return on investment, apart from boosting government revenue and improving government’s commitment to developmental projects across the country.

“I am proud to announce that our UTC has significantly dropped from above $70 per barrel in 2014, to about $27 per barrel, as at year end 2016,” Mr. Baru said. “Indeed, NNPC is committed to further drive down the UTC.”

With a savings of about $43 per barrel per day, this translates to a cost reduction of about N31.4 billion on crude oil production every year.

The NNPC GMD, whose lecture was titled: “Find More, Produce More” at the one-day event, solicited the support of all industry players to achieve the goals and aspirations of the country in the oil and gas industry.

He said there was an urgent need to link the industry with other sectors of the Nigerian economy, pointing out that although the increased oil production involved the cost factor and the commodity price, the NNPC had produced oil within the year with much efficiency.

“Price may not be readily under our control at the moment, but we need to manage cost of production within the Industry. Within the period, we took over the reign of leadership in the Corporation, we have been able to drive down cost to a very commendable level,” Mr. Baru said.

To achieve government’s aspiration of 40 billion barrels of crude oil reserves and a production of four million barrels per day by 2020, the GMD explained that the country needed an incremental production of at least one billion barrels in reserves year-on-year till 2020.

He said at a minimum, the country requires about half a million barrels in incremental production capacity per day within the same timeframe to realize the target.

“Considering our quest for revenue generation as a nation, it is a given that we need to increase our exploration efforts in order to sustain our reserve base and grow production,” he noted.

He charged industry players to invest in exploration activities, especially now that crude oil price was low “so that when the tide turns, all we would need to do is to turn on the taps.”

Mr. Baru said NNPC would continue to make investments geared towards increasing the national hydrocarbon reserves and daily crude oil and gas production, adding that the Corporation was committed to propelling power, industrial and agricultural sectors through an adequate provision of gas-to-power and sustainable feedstock to fertilizer and petrochemical industries.

Chairman of the occasion and former Minister of State for Petroleum, Odein Ajumogobia, said there was no better time to discuss increased oil production capacity than now.

Chairman of the Aret Adams Foundation, Egbert Imomoh, said Nigeria should position itself for the future by finding more oil and producing more of the commodity to earn more revenue for the country.

This year’s Aret Adams Annual Lecture Series, which was the 14th, seeking to immortalize the ideals of Godwin Aret Adams who was the former GMD of NNPC, and one-time Adviser on Petroleum Resources to the Head of State, Abdulsalami Abubakar between 2008 and 2009. Adams died 15 years ago.