NNPC, Partners Achieve 30% Oil Production Cost Reduction

The Nigerian National Petroleum Corporation (NNPC) in collaboration with other oil exploration and production companies operating in Nigeria have brought down the cost of oil production in the country by 30 per cent.

The Group Managing Director of the NNPC, Mallam Mele Kyari, disclosed this recently on ‘The Morning Show,’ on Arise News Channels, THISDAY’s sister broadcast station.

High cost of oil production in the country became a front burner last year at the heat of the COVID-19-induced oil market crash as Nigerian oil companies were spending more to produce a barrel of oil unlike other countries, a situation that resulted in the pegging of production cost at a maximum of $10 per barrel, by the NNPC. Fielding questions on industry-wide issues, Kyari said the NNPC and its partners realised during the COVID-19 that it was no longer practicable to produce at the high cost being produced at the time and still be effective and profitable, hence the decision to approach their contractors for renegotiation of contracts, which he said, worked for them.

He said with the contract renegotiations and discounts, in addition with some optimisation of operating process driven by the National Upstream Cost Optmisation Programme (NUCOP), the cost of production was reduced by 30 per cent.

Kyari said: “When we saw that opportunity (contract renegotiation and discounts) we decided to launch another perspective, which is that, we set a target for ourselves.

“We met our partners and we engaged and ensured that it serves the interest of all of us to bring down the cost of production to that level.

“We launched an initiative called NUCOP, it’s the National Upstream Cost Optimisation Programme. What it does is that you kind of pool together all your cost sources, you focus on the areas that you are most vulnerable, you share resources, you shorten your contracting processes, you don’t keep vessels that you don’t need, you don’t keep aircraft that you don’t need, and so many of these.

“And of course, our partners found this very attractive and the end result is that we are able to substantially bring down the cost. I can’t put number on it but I know for sure that we are able to bring down our operating expenses by at least 30 per cent than what it used to be one year ago. The net effect will be on the cost per barrel.”