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 President Buhari Seeks Lower Oil Production Costs, Targets 40bn Barrels Reserve

President Buhari Seeks Lower Oil Production Costs, Targets 40bn Barrels Reserve


President Muhammadu Buhari yesterday called on the operators of Nigeria’s oil and gas industry to search for more efficient ways of exploiting the commodity to reduce the cost of production per barrel.

He said at the fourth edition of the Nigeria International Petroleum Summit (NIPS) in Abuja that although Nigeria is observing the trend in the global movement toward renewables, he is optimistic that oil would remain relevant in the coming years.

According to him, his administration’s drive for the discovery of more reserves and ramping up oil production is irrevocable.

The president, represented by the Minister of State for Petroleum, Mr. Timipre Sylva, stated that his administration has demonstrated commitment to the overhauling of the oil and gas industry to make it fit for the future.

Other speakers at the event included the Managing Director, Total E&P, Mr Mike Sangster; Senate President, Dr. Ahmad Lawan; Speaker, House of Representatives, Hon. Femi Gbajabiamila, and other stakeholders in the industry from other African nations.

Buhari said he had continued to receive updates on the Petroleum Industry Bill (PIB) and expressed the hope that the National Assembly would pass it into law soon.

“The ambitious goal of ramping up crude oil production to at least four million barrels per day, and building a reserve of 40 billion barrels remains sacrosanct and guiding principle to our overall outlook for the industry, creating a conducive business environment for hydrocarbon industry to thrive is no longer a choice. It is a necessity,” he added.

The president said the accelerated and unprecedented oil demand disruption and the supply glut that generated the crisis in the global economy had presented both challenges and opportunities.

While calling for stringent measures to reduce production cost, Buhari stated that if strategies are not quickly put in place, the country may witness a situation in which expected oil revenues will be wiped out by costs.

“In this regard, lower cost is critical. Cost is the energy of the future. The industry needs to drive down costs per barrel before it is exterminated by prices falling below production costs, a phenomenon we experienced at the outset of the pandemic,” he said.

He added that given that about 80 per cent of the global energy mix by 2040 will still be a hydrocarbon, Nigeria cannot turn its back yet on more exploration, as the discovery of new fields remains crucial.

The president said the industry needed to address short-term opportunities using existing technologies that could extend the life of mature fields, adding that nobody should doubt his commitment in that regard, given the bold move to issue new more marginal field licences recently.

According to him, the immediate challenge is that the global agenda for energy transition is slightly taking the backseat of governments across the world, which is now more focused on managing the COVID-19 pandemic and its impact on economies than the quest for the energy transition.

“However, energy transition is real, renewable technologies are getting cheaper and investors are increasingly conscious of environmental issues and are beginning to turn their back on hydrocarbon investments, but history has shown that human beings have such an appetite for energy, which renewables do not have the capacity to cope with in the foreseeable future.

“Experts project that about 80 per cent of the world’s energy mix in 2040 will still come from hydrocarbons. Fossil fuels will continue to be the source of dozens of petrochemicals and petrochemical feedstock that companies transform into versatile and valued materials for modern life,” he said.

He expressed the hope that the hydrocarbon industry will still remain a multi-trillion dollar industry in the coming decades, especially for a country with a vast hydrocarbon potential like Nigeria.

In his remarks, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, described cost as “everything” in the future of the industry.

He stated that the COVID-19 crisis has shown that only the best of producers will survive because cost control has become a major issue for the industry.

He, however, added that the corporation and its partners were working together to make sure that it is achieved.

He mentioned funding as another major issue in the industry today due to the paucity of resources across the globe and overall reluctance by investing companies or banking authorities to divest from oil-related businesses.

“This is what we have to live with and what we have to contend with. Obviously, the best of the business that will survive are the ones that try to translate into much more climate-friendly businesses,” he said.

Kyari added that security remains a major issue for the industry in the country, but assured stakeholders that there is a concerted effort across the industry in the Niger Delta and all other locations to make sure that all the security threats are dealt with.

He stated that the industry must work together to look at advantages that are inherent in the transition, while moving from fossil fuels to renewables energy.

He said: “And to do this, you must automate, you must reduce your cost, you must be more efficient and also, we must be more collaborative in our approaches and this has paid off for us.

“Ultimately, this crisis that we face in the industry is surely an opportunity for us to do many things differently, and particularly more so in our country to see where the enormous gas resources can be converted to value and join the journey to blue and green hydrogen.”

Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Dr. Sanusi Barkindo, in his address, stated that participating countries have taken proactive and pre-emptive actions to help reduce volatility, stabilise the oil market, and provide a flexible platform for recovery with potentially broader participation in the coming years.

He added that countries have reviewed the decisions on a monthly basis to proactively anticipate market developments and improve the core principles upon which the oil enterprise was founded.

He listed the principles as transparency, equity and fairness, emphasising that conformity levels with the production adjustments have been a testimony to the depth of member countries’ commitment.

He added: “After the unprecedented turmoil of last year, in recent months we have seen relative stability in the oil market. The market has continued to react positively to the decisions we took, including the upward adjustments of production levels beginning in May this year.

“Overall conformity to the production adjustments was 114 per cent in April 2021, reinforcing the trend of high conformity by the participating countries.”

He said despite the positives, the uncertainties remained, such as the continuing high number of COVID-19 cases in some countries; the uneven vaccine rollout, particularly when looking at the developed versus the developing world.

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