*Figure contradicts Minister’s $13/bbl estimate
Oscarline Onwuemenyi 11 January 2017, Abuja – The cost of crude oil production in Nigeria is as high as $29 per barrel, according to a recent cost ranking covering 12 major oil producing countries across the world.
The finding contradicts the position of the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, on the cost of producing a barrel of crude oil in the country, but confirms the position of industry operators that the figure was much more than government’s calculations.
Dr. Kachikwu reportedly caused a stir around the oil industry at a meeting a year ago in Davos, Switzerland, when he declared that cost of producing a barrel of crude oil onshore Nigeria was less than $13.
The minister also told his audience that Nigeria would still make profit if crude oil prices averaged $20 per barrel.
But the latest finding, contained in the draft Petroleum Policy for Nigeria, which is currently being debated by stakeholders, indicated that Nigeria still remains one of highest cost producers of crude oil in the world.
Portions of the report obtained by our correspondent in Abuja noted that “Nigeria is one of the highest cost of extraction oil provinces in the world, estimated at $29/bbl.”
According to the document, Nigeria is only less expensive, as a cost per barrel producer, than Brazil and UK, in a 12 country ranking that includes Saudi Arabia, Iran, Iraq, Russia, Indonesia, Norway, US Non Shale, US Shale, Canada and Venezuela.
The cost ranking, pulled out of a U-Cube analysis by Rystad Energy, the Norwegian consulting firm, doesn’t indicate whether this was an average of a basket that includes crudes from deepwater, shallow water and onshore terrains. It is significant, especially as it features different figures for US Shale: $23.35/bbl and US Non Shale: $20.99/bbl.
What it does, however, is that it breaks down the cost structure for Nigeria as follows: Gross taxes: $4.11, Capital Spending: $13.10; Production costs: $8.81 and Admin/transport costs: $2.97.
The 115-page document noted that, “Nigeria has to substantially reduce the costs of production if the country is to be competitive in the modern low oil price world, and if it is to have anything more than a bare minimum government take.”