Oil Production: Cost Optimization- NNPC Seeks Stakeholders Collaboration

As a move to achieve $10 per barrel crude oil production cost, the Nigerian National Petroleum Corporation, NNPC, has insisted on stakeholders’ collaboration in the oil and gas industry. The Group Managing Director of NNPC, Mallam Mele Kyari, made the call Tuesday, during the launch of the Nigerian Upstream Cost Optimisation Programme (NUCOP), at the NNPC Towers in Abuja.

Kyari stated that the current reality dictated by the global energy transition and demand erosion occasioned by the Covid-19 pandemic has made cost optimisation imperative. In his words: “It is in our informed interest to optimise our cost of production. The realities of energy transition and investor choices are very much clear to us. There is nowhere in this world where a less cost-efficient operator can survive today.

“Industry players need to adopt such measures as transparency, collaboration, efficiency and shared services to help in driving down cost in order to meet the target.

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“Under the NNPC operational theme for the year known as ‘Execution Excellence’, the Corporation will achieve a contracting cycle of six months or less which would help create efficiency and drive down unit operating cost to sub $10 per barrel level.

” On his part, the Minister of State for Petroleum Resources, Chief Timipre Sylva, stated that currently, the average cost for Joint venture production was below $30 per barrel, while that of Production Sharing Contract (PSC) production was below $20 per barrel, stressing that there was a need for cost optimisation in order to keep the oil and gas industry afloat in Nigeria.

“Today’s engagement with industry stakeholders, under the NUCOP, is part of the resolve of this administration to confront this challenge of high production cost. I expect robust discussions and a realistic roadmap to achieve the cost optimisation objectives,” the Minister stated.

In his goodwill message, the Chairman, Senate Committee Upstream, Senator Bassey Akpan, said the 9th National Assembly would pass the Petroleum Industry Bill (PIB) to provide a conducive environment for all operators in line with global best practices. Leaders of agencies, trade groups and labour unions in the oil and gas sector, who spoke at the event, described the initiative as a welcome development and pledged their support for NUCOP.

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The stakeholders include the Nigerian Content Development and Monitoring Board (NCDMB), Oil Production Trade Section (OPTS), Independent Petroleum Producers Group (IPPG), Petroleum Technology Association of Nigeria (PETAN), Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG). NUCOP is an industry-wide initiative designed to optimize Nigeria’s upstream operating expenses through process enhancement and industry collaboration to ensure improved and sustainable profitability for all stakeholders.