To sustain the price crash that has left crude market in the south, the Nigerian National Petroleum Corporation has commenced activities to drive down the cost of producing a barrel of crude oil to $10 and below in oilfields across the country.
Managing director of NNPC, MeleKyari, made how the national oil firm had sustained operations despite disruptions and slowdown in economic activities known to the public on Thursday.
As previously said by Kyari in March, the cost of crude oil production in the country was between $15 and $17 per barrel, while that of Saudi Arabia was between $4 and $5.
He said countries producing at the cheapest price would remain in the market while those with high costs of production would not be able to cope with the competing prices.
Kyari, in a presentation to journalists, said revenue flow had been greatly impacted by the oil price decline of about 65 per cent.
He said the development had affected the corporation’s liquidity position and the anticipated remittances of N1.27tn to the federation account from April to December 2020.
“Oil price collapse below cost has led to production deferment across the world. The NNPC has, however, maintained steady production in order not to lose market share in the event of crude oil price recovery.
“Instead, the NNPC has taken aggressive capital allocation to prioritise low-cost oil production and additional measures to ensure cost discipline, including re-negotiation of contracts downwards and other business obligations, thus saving 40 per cent of the proposed budget and cost,” said he.
Kyari said the corporation had rolled out strategies to achieve a Unit Operating Cost of less than $10 per barrel across the country’s upstream operation without jeopardising growth.
According to the NNPC boss, the unit operating cost for 2019 full-year performance exceeded the target of $10 in all cases.
His words, “It is observed that the reported performance for the first quarter of 2020 highlights the need for further costs optimisation as the UOC figures are above the target of $10 per barrel in all cases.”The NNPC, he noted, had scaled up efforts to secure pipeline network against vandalism and theft, adding that the average monthly petrol losses had dropped from 31m litresin 2019 to 14m litres in 2020.
Systems 2B and 2E are critical to effective distribution of petroleum products to the South West, South East and other parts of the country, he said.
“System 2B and the destination depots along the South West distribution corridor are active,” he said, adding that persistent vandalism and product theft forced the shutdown of Aba/Enugu segment of System 2E.
Financial Street gathered that56.8m litres of petrol valued at N7bn were lost along System 2B from January to April this year.