The Federal Government relies on the oil sector for a large part of its revenue. But growing sectoral revenue requires new thinking and policy that promote efficiency and reduced cost of production. The Nigeria National Petroleum Corporation commitment to efficiency and improved earnings prompted it to target cost reduction initiatives to boost efficiency and profitability of its operations.
Stakeholders have described the plan as ambitious but plausible, given the many benefits that will come with reduced cost of production per barrel of oil. “Whenever you have a price regime like we have right now, where commodity prices are low, the only way we are able to squeeze out some reasonable cushion in terms of cash and financial gains to the federation is by containing and constricting our costs,” he said.
Ewubare, said the current cost structure was a fallback from the high commodity cost regime a few years back of about 100 to 110 dollars per barrel. “Technology and innovation is key and interesting, but for now we are not using research and innovation to try and cut down our cost. In my initial remarks, I said the costs we have are a relic of the days of high prices, a relic of the environment in which we operate. Yes, we can use technology to address some security issues in the Niger Delta, for example,” he added.
He said the corporation has what is required to achieve targeted $10 per barrel lifting cost, which will enhance revenue for the country.He said Nigeria has made a lot of investment, and now is the time to to ensure that its operating cost does not cross certain threshold. Additionally, he said low cost efficiency ratio relative to price and indirectly low cost per barrel increase profit that government take because every dollar saved is taxable.
He said with the drop in Nigeria’s foreign exchange earnings, there was need for agencies to find new ways to earn money for government. “The NNPC will make more savings and revenue as it begins to reduce cost of its operations and crude oil production cost per barrel,” he said.
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