Kyari fingers indigenous oil firms in high production cost


Group Managing Director, NNPC, Mallam Mele Kyari, says a few indigenous oil firms can meet up with $10 per barrel production cost target in 202


The Nigerian National Petroleum Corporation (NNPC) at the weekend laid bare the identities of those responsible for Nigeria’s high cost of oil production. While oil prices hover around $43 per barrel, some local companies in the country produce the commodity for as high as $45 per barrel, the corporation declared.


Group Managing Director of the Corporation, Mallam Mele Kyari, who gave this hint, declared that Nigeria’s highest and unacceptable crude oil production cost comes from indigenous oil firms. Kyari, in a paper at a webinar, also noted that the deployment of expatriates was contributory to high production cost, as some companies produced  oil for as high as $45/barrel.


The cost of the commodity had hovered around $43/barrel in about two weeks. The NNPC boss, however, stated that few indigenous companies such as Seplat responsible for the high cost would achieve the target of cutting down the production cost to $10/barrel by 2021.


Kyari said: “When you come to the indigenous oil companies, and I’ve made an exception of Seplat and, of course, a few others, I can share with you that the highest cost of production that we have in this industry comes from companies operated by local oil firms. Unfortunately as it is, that is the reality.” He insisted that production cost must be reduced in the oil sector, as there was no way way the country could sustain the current cost structure.


“Some of our assets are producing oil in the excess of $45/barrel. It is simply not feasible in today’s circumstance,” Kyari said. He added: “It simply also means that probably you are subsidising the upstream, and, of course, nobody subsidises the upstream anywhere in the world. But that is what we are practically doing.”

Kyari also stated that surprisingly, some multinational oil companies and partners of NNPC were also producing oil at completely unacceptable prices. He joined the Minister of State for Petroleum Resources, Timipre Sylva, to call on operators to cut down on oil production cost.


Sylva, who gave the opening remarks at the summit, stated that government had rolled out strategies to reduce oil production unit cost. Kyari called for the enhancement of local skills in the sector, stressing that expatriates were so many in the industry and this often increased running cost.


He said there was a need to create adequate local skills in the Nigerian oil and gas sector. Kyari said: “Today, with all the best of our intentions, we still have significant inflow of expatriate skills and staff.


This is not available in our industry; it is a very global industry. You cannot have all the skills but today you still need to work on this. “So that by having local skills available you are able to reduce cost, you are also able to create wealth in communities where we work throughout the country and the continent.






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