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IOCs Gives Reasons For Escalating Operations Cost In Nigeria

International oil companies (IOCs) on Wednesday called for strategies to drive down the escalating operations cost in Nigeria’s oil sector to make it globally competitive.

The troubled players in upstream and downstream identified multiple and scathing taxation regime; delay and tardiness in the contracting cycle, degenerating security situation in the country and duplicity in regulatory functions, incessant  pipeline vandalism, among other blights.

Speaking at a session on “Promoting Investment & Collaboration in Nigeria’s Oil & Gas Industry” at the Nigerian Gas Association (NGA) International Conference and Exhibition, the Executive Director, Asset Management and New Energies, Total Nigeria Mr. Patrick Olinma, said the company coughs out massive funds to secure its assets located on territories where naturally it did not need to spend on such.

He said, “Last year, for instance, on the average we had two-and-half third party interventions on our pipeline which is actually sabotage. This year, it has gone up to three times a week. Three times a week, we have interventions on our pipeline from third party who have no business intervening on our pipeline system. Sometimes, we have to curtail production, sometimes we have to shut in the wells. These all add to our production (cost).”

In his remarks, the Chief Operating Officer (COO) Upstream of the Nigeria National Petroleum Corporation (NNPC) Bello Rabiu, who represented the NNPC GMD said if the government can sort out the security problem in the sector, Nigeria could produce up to 3million barrels crude per day in a very short time compared to the current 2.2m barrels per day production.

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“if that can happen, it can reduce the cost to $15 per barrel.” Rabiu said.

In his views, the Chairman and Managing Director, Chevron Nigeria Ltd Jeff Ewing, said there were a lot of cost imposed by the government that is contributing to the high cost of oil production in Nigeria.

“We have a lot of taxes and levies that you won’t get in other countries. Those are things we need to consider if we really want to get down to the $15 per barrel production cost.

“For example we take a vessel from Onne to our deep-water FPSO and back, it cost us N120 million one trip and three quarter of the cost is charges for NPA, security and other things that you won’t normally get in other locations. That’s one area we need to look at and figure out how together we can reduce the costs”

On his side, the Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo) Bayo Ojulari said the reason companies spend as much as 75 per cent on operating cost was because every stakeholder wants to benefit on the cost side rather than in the production.

He said finding a way to shift the interest of communities, legislators and regulators to the productive side of the business (and not just cost) was the only way to make the country competitive.

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The moderator, Soji Awogbade of Aelex lamented that Nigeria was falling behind in production and being overtaken by smaller countries.

He joined other speakers to call for a framework reform that seeks to enthrone a single regulation in monitoring affairs of the sector.

“A one-stop shop is what we seek where everything needed for operation and contract can be sourced”  he said.

Source: The Sun

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