By Etuka Sunday
The Federal Government yesterday said it was targeting below $10 per barrel cost reduction for oil and gas production for the country.
Minister of State for Petroleum Resources, Chief Timipre Sylva gave the hint at a Seminar on “Effective Cost Management in the Oil and Gas Sector”, organised by the Quantity Surveyors Registration Board of Nigeria (QSRBN) in collaboration with the Petroleum Technology Development Fund (PTDF) in Abuja.
Sylva said, the cost of crude oil production in Nigeria is still one of the highest in the globe, adding that the current cost of oil production at above $30 per barrel was unsustainable therefore, there was need for innovative solutions to reverse the trend.
“Nigeria is the largest economy in Africa. With a GDP of about $400 billion, a population of over 180 million 70% of which is below the age of 35 years, an aggressive drive for industrialisation and diversification of economy, the potentials for growth supersedes most economies in the world.
“Despite our quest for growing the economy and the potential for great investment opportunities particularly in the oil and gas sector, the cost of crude oil production in Nigeria is still one of the highest in the globe.
“Let me go back to the memory tone, the technical cost of crude oil production in the 805/905 was around $4 per barrel, in the early 2000, it was between $5 and $6 per barrel while 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.
“In the regime of $50-$60 per barrel price of crude oil, a cost of over $30 per barrel is unsustainable and that is why we need to come up in this programme with what we need to do to reverse the trend.
“In other words, the need to achieve effective cost management in the oil sector is an urgency of yesterday.
“We shall all use the outcome of this Conference to give our oil sector the propulsion they require to bring down the cost of crude oil production to a single digit as obtainable in other economies. This is an urgency of yesterday,” he said.
The minister said, in addition to reduce the cost of crude oil production, there was need to also reduce contract approval cycle, enhance transparency, reduce barriers to entry and regulatory transaction costs.
He however, challenged Nigerian quantity surveyors and cost engineers to henceforth deploy the principles of Total Cost Management and collaboratively come up with solutions on how to minimise the impact of cost drivers.
Earlier, in his Welcome Address, the Executive Secretary, PTDF, Dr. Bello Aliyu Gusau said, the collaboration between the Fund and QSBRN was necessitated by the exponential increase of costs exploration and production of crude oil with the attendant decline in government and other producers’ revenues.
Dr. Gusau said, “from our industry skill and competency gap analysis, issues of cost engineering, cost control, cost estimating as well as other cost management are amongst the areas of greatest challenge in the oil sector.”
He said, “the PTDF is willing to partner and collaborate with industry in finding solutions to critical issues affecting the full realization of Government’s vision for the oil and gas industry and will be prepared to work with professional bodies and the academia towards developing home grown solutions to support the industry efforts to stay competitive through effective cost management.”
Declaring the Seminar opened, the Minister of Works and Housing, Mr Babatunde Raji Fashola said, the present administration under the leadership of Muhammadu Buhari placed a high premium on projects and administrative cost reduction in the running of the administration.
“Organising a workshop on effective cost management in the oil and gas sector is in consonance with the next level agenda of this government and being in tandem with value for money in the day to day operation of the sector.
“Involvement of the quantity surveyors will ensure efficient allocation and utilization of resources, probity, value for money in our infrastructural developments in Nigeria,” he said.