*Corporation won’t lay off staff
Lagos — The Nigerian National Petroleum Corporation, NNPC has called on stakeholders in the oil and gas sector to join hands with it in realising production cost of $10 per barrel.
Speaking during a webinar organised by the Nigerian Association of Petroleum Engineers, NAPE on Wednesday, NNPC’s Group Managing Director, GMD, Mele Kyari said the Cooperation targets production of $10 per barrel latest end of 2021.
Titled ‘The Impact of COVID19 on the Nigerian Oil & Gas industry- The Way Forward’, Kyari described current production cost of $18 per barrel as “unrealistic”, adding that one of the lessons COVID19 has thought the sector, is that it could still produce for as low as $10 per barrel.
“…Today’s cost is unrealistic. Some costs as high as $40 per barrel isn’t realistic, and this points to some fraudulent practices going on in the industry. And we must cut our costs. Our target is to come down to at least $10 per barrel. We shouldn’t exceed that because it is possible to deliver at $10 per barrel. We have since realized that there are assets that deliver at $10 per barrel and that includes the gas resources. So this is possible. And what COVID19 has thought us is that we can do this and our target is to arrive at this target at 2021,” he said.
On firms in the sector already downsizing as a result of impact of the COIVD19 on revenue, the GMD said NNPC does not have the intention of laying off staff. According to him, the Corporation would rather cut costs.
“As a result of low revenue caused by low demand from the pandemic, we can’t blame firms who have decided to lay off some of their staff members. Revenue isn’t flowing in as it used to. But the NNPC is not going to sack anybody. We would rather cut costs to continue to function. There are many ways can bring down costs. And we have seen that there are many things and services we can do without,” he said.
He explained that Nigeria is currently experiencing a collapse of its Gross Domestic Product, GDP as a result of low revenue.
“Nigeria has not been able to sell its oil like it used to. This is a problem because it has led to the collapse of our GDP between January to this time. What this means is that our economy is gradually winding down. Demand for oil has gone down goes down globally in a way we have never seen before. Brent crashed to around $13 per barrel. And once Brent falls to such, we had to sell our oil below $10 per barrel. It means we are dashing people our oil just because we have to sell”, he said.
He explained that as a result, the industry faces uncertainty which resulted in drop in investment to as low as 22 percent.
“It created a situation of instability for us. There is a massive decline in revenue. And as you are aware, our estimate was at $67 per barrel but we ended up below $13 per barrel. Then we know we are in trouble. So we decided to sell our oil at a discount. We took out as much as $4 per barrel and we still had to go down.”
“Now, our partners could not continue to invest. They could not plan with us because there is not cash flow and the bank would not lend us money. But we were lucky that we were able to get some level of FID projects but that’s not the level we want. It means some projects would not be delivered at the initial set time”, he said.
He, however, said the industry is hopeful with the ongoing rebalancing which shot Brent to $40 per barrel currently, adding that Nigeria hopes prices continue to increase.