The Chief Operating Officer, Ventures and Business Development, NNPC, Mr. Roland Ewubare, in this interview on Arise TV,
speaks on how the corporation is resolving some of its current challenges. Emmanuel Addeh brings excerpts:
The NNPC is working on reducing its cost of production per barrel of oil. Can the $10 target be met?
The $10 figure our GMD mentioned as production cost is an aspirational figure. We look at where we are coming from in terms of cost and what the larger cost drivers are for us in the industry. Against that backdrop, the conversation about cost becomes an imperative and urgent one. You have got to understand that at the macro-economic level which you focus on a lot on your programme, oil the backbone of our economy, in terms of contribution to GDP is not that much, between 7 and 11 per cent depending on the year in question, but as a contributor to our foreign exchange earnings and contribution to national budget, it plays an important role in our nation. 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.
Our costs are driven by a multiplicity of factors, our staff cost. You and I know that the oil and gas industry in Nigeria probably pays the highest salaries, they even pay more than banks. That is a huge part of what we spend money on. The environment in which we operate, our primary production base in the Niger Delta, still have issues around security, militancy and all of that.
So, all of those add an extra layer of cost to production. There are many countries in this world where their citizens don’t vandalise national infrastructure. So, they don’t have the added cost that we have.
For us to move equipment to an offshore location, we need mobile policemen loaded with weapons and that comes with added cost. But to address that question, $10 is an aspiration. When are we getting there? We are looking very actively at hitting that threshold before the end of quarter four of 2021. It’s an aggressive target for sure.
How did the production get so high compared to other countries?
The current cost structure we have is a fallback from the high commodity cost regime we had a few years back of about 100 to 110 dollars per barrel. Some of the projects that were sanctioned at that time used that price point based on certain assumptions. Now that prices have gone down, it will take a while for the industry to recalibrate and readjust to a more reasonable cost regime. It’s a work in progress, but we are certain that at the end of next year, we will be able to get to $10 per barrel as our operating cost. For our technical costs, they are a separate matter.
What is your business unit doing in the area of research and development, cost saving and deployment of technology that can assist, like in the NPDC in bringing down cost?
NPDC is our flagship Exploration and Production company as a nation. NPDC’s peers are shell,…