For Kachikwu its low prod. cost

Business a.m. - - FRONT PAGE - Sto­ries by Bukola Od­u­fade

NIGE­RIA AP­PEARS TO BE still away from en­ter­tain­ing any hope of achiev­ing a tar­get crude pro­duc­tion cost of $15 per bar­rel, if re­marks by ju­nior petroleum min­is­ter, Ibe Kachikwu that the coun­try has to learn one or two things about cost ef­fi­ciency

NIGE­RIA AP­PEARS TO BE still away from en­ter­tain­ing any hope of achiev­ing a tar­get crude pro­duc­tion cost of $15 per bar­rel, if re­marks by ju­nior petroleum min­is­ter, Ibe Kachikwu that the coun­try has to learn one or two things about cost ef­fi­ciency from the shale revo­lu­tion hap­pen­ing in the United States, are any­thing to go by.

Ibe Kachikwu told Bloomberg in a re­cent in­ter­view that there should be no con­cern over whether crude in­ven­to­ries in U.S. are build­ing or not, the goal should be mak­ing pro­duc­tion more ef­fi­cient and ul­ti­mately be­ing able to bear the socks in terms of price volatil­ity.

“What I have al­ways coun­selled is that what the shale revo­lu­tion should do for us is that we should go back to be­ing the least cost pro­ducer, be­cause tech­nol­ogy has helped shale oil grow more rapidly than it can at lower cost and they are very com­pet­i­tive,” he said.

The coun­try in March had recorded a de­cline in its crude pro­duc­tion cost, and cur­rently, the coun­try’s off­shore oil pro­duc­tion costs are in ex­cess of $32 per bar­rel, while on-shore field costs are about $23 per bar­rel, the min­is­ter said, but the coun­try still has one of the high­est pro­duc­tion cost amongst its coun­ter­parts in OPEC.

Kachikwu is a strong pro­po­nent for cost ef­fi­ciency in crude pro­duc­tion and ear­lier this year, rec­om­mended in­cen­tiviz­ing or­gan­i­sa­tions with the least cost pro­duc­tion to en­cour­age new in­no­va­tions to­wards fur­ther cost re­duc­tions. This was ap­plauded by var­i­ous in­dus­try play­ers and ex­perts alike who agreed that un­less the coun­try can pro­duce cheap oil, it would find it­self be­ing left be­hind.

Also, there are no in­di­ca­tions that the tar­get of $15 per bar­rel has been met. In United States, the cost per bar­rel of U.S. shale comes in at $23.35, but Saudi Ara­bia’s oil is al­most the cheap­est to ex­tract in the world at $8.98.

He also blamed oil prices volatil­ity on the Iran ban, civil strife and unuti­lized ca­pac­ity in many OPEC coun­tries, but down­played the ef­fect of short­fall in crude pro­duc­tion from Iran and Venezuela.

“I think so, with some dis­ci­pline, OPEC might be able to cover some of the gaps seen and be­cause of the kind of prices we have to­day, shale will con­tinue to be bullish, so I think we are over­es­ti­mat­ing sud­den drop in sup­ply or pro­duc­tion,” Kachikwu said.

He also fore­casted that oil prices would vary be­tween the $70 to $79 range for the rest of 2018 and the be­gin­ning of the next year.

What I have al­ways coun­selled is that what the shale revo­lu­tion should do for us is that we should go back to be­ing the least cost pro­ducer, be­cause tech­nol­ogy has helped shale oil grow more rapidly than it can at lower cost and they are very com­pet­i­tive

kachi­ikwu

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