FG initiates plan to slash crude oil production costs to below $20/Barrel
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has unveiled strategies aimed at drastically reducing the cost of crude oil production to less than $20 per barrel, according to a document obtained by our correspondent.
The document, titled “Outlook for the Upstream Oil and Gas Sector of the Nigerian Oil and Gas Industry for 2024 and the Near Term (2024-2026),” authored by NUPRC’s Chief Executive, Gbenga Komolafe, highlights the need to optimize crude oil production costs, which currently range between $25 and $40 per barrel.
Komolafe emphasized that NUPRC is committed to implementing measures outlined in the Petroleum Industry Act (PIA) to achieve significant cost reductions in the oil and gas sector. One of the key initiatives involves establishing a framework for crude oil and gas transportation to streamline logistics and minimize associated costs.
He stated, “In accordance with the commercial regulation mandate of the Commission as enshrined in Section 4 of the Petroleum Industry Act (PIA), the Commission would, in 2024 and the near term, pursue strategies aimed at optimizing the unit cost of production for oil and gas by driving the reduction of the current average unit cost of production in all terrains to below $20 per barrel, in the near term from current sub-optimal levels of $25-$40 per barrel.”
To achieve this ambitious target, NUPRC has devised plans to standardize tariff templates for oil and gas transportation costs and implement an open access regime for upstream oil and gas pipelines and ancillary facilities. These measures are expected to enhance transparency and efficiency in the sector, thereby reducing operational expenses.
Furthermore, the commission aims to incentivize investment in oil and gas infrastructure to bolster domestic delivery capabilities and stimulate growth in the deregulated domestic gas market. Streamlining administrative approval processes will facilitate quicker project implementation and encourage greater participation from stakeholders.
NUPRC also intends to activate Host Community Development Trust Funds to foster social inclusion and garner support for safeguarding oil and gas facilities. By addressing community grievances and ensuring uninterrupted operations, the commission seeks to eliminate disruptions that drive up operational costs.
The document outlines additional steps to mitigate environmental impacts resulting from oil and gas operations. NUPRC plans to activate the Environmental Remediation Fund Administration Regulations 2023, pending gazetting, to address ecological concerns effectively.
Moreover, the commission aims to collaborate closely with the Nigerian Content Development and Monitoring Board (NCDMB) to ensure that the implementation of Nigerian Content requirements does not escalate costs. By promoting local participation and capacity building, NUPRC seeks to strike a balance between economic growth and regulatory compliance.
In summary, NUPRC’s strategic initiatives underscore the government’s commitment to enhancing the efficiency and competitiveness of Nigeria’s oil and gas sector. By driving down production costs and fostering sustainable development, these measures are poised to strengthen the country’s position in the global energy market while benefiting local communities and stakeholders alike.
