The Nigerian National Petroleum Corporation (NNPC) has
threatened to cancel some of its expensive Joint Venture (JV)
contracts.
Group Managing Director (GMD) of NNPC, Mallam Mele Kyari, hinted
of the plan during the fourth edition of the Nigerian Association
of Petroleum Explorationists(NAPE) webinar seminar series titled:
‘The Impact of COVID-19 on the Nigerian Oil and Gas Industry-The
Way Forward held yesterday.
This was even as it warned contractors, suppliers and companies
against inlated, over bloated and unrealistic contract figures.
Kyari, who was the guest speaker at the webinar, frowned at the
activities of some of its partners, especially indigenous oil
companies that are producing oil at a very high cost of about $93
per barrel while some others are producing same at a relatively
cheaper cost.
‘‘The era of some of our partners producing at a very high cost
will no longer be acceptable to us anymore. It is either they
become more efficient at what they are doing by cutting cost or be
ready to be shown the way out.
‘‘If they are not ready to be cost effective, then we may have
no other option than to cancel those contracts and give them to
those that can manage and produce at a relatively cheaper cost.
This is business and we cannot afford to run same like a charity
organisation’’
The NNPC boss lamented that the high cost of production in the
industry was unacceptable and was as a result of a number of
factors, some of which included; structural inefficiencies that
exist in the system and processes, environmental factors which
every contractor factors in while doing business; be it risk as it
relates to human resources and materials.
He noted that every cost on the list of business has a premium
that is related to our operating environment, insisting that those
premiums are much exaggerated and not reflective of the realities
on ground because suppliers, contractors and companies were only
taking advantage of such to hike contract cost.
Kyari, while specifically calling out indigenous companies in
this unwholesome act, said the NNPC in its several dealings with
them have observed a list of governance structure and processes
that are not significant and is now whipping on International Oil
Companies (IOCs), eventually resulting into producing oil above its
actual cost.
The NNPC GMD said the current vision is to achieve a $10 per
barrel industry cost, adding that for these to happen companies
must do so many things to arrive at that cost.
According to him, part of what should be done to achieve that
target is for stakeholders to be more cost conscious, plan better,
more realistic, and prudent and the appropriate leadership to drive
the focus.
He assured that the attainment of a $10 per barrel by 2021 was
possible; adding that such would enable the country to meet its
three million barrels per day (bpd) and 40 billion oil reserve
targets in a seamless manner.
He regretted that it was while discussions was ongoing among
stakeholders to see how the cost of oil production could be reduced
that the coronavirus pandemic hit the global stage, forcing oil
price to an oil time low of about less than $10 per barrel.
He said the coronavirus pandemic has clearly proven to oil
producers that the commodity could actually sell for less than $10
per barrel, adding that the country cannot continue to produce if
something was not done about the cost.
He said the emotions should be shoved aside because oil producer
that is not ready to produce at around $10 per barrel was not in
tune with current market realities and must be ready to quit the
stage for those that are ready for the challenges ahead
The Nigerian National Petroleum Corporation (NNPC) has
threatened to cancel some of its expensive Joint Venture (JV)
contracts.
Group Managing Director (GMD) of NNPC, Mallam Mele Kyari, hinted
of the plan during the fourth edition of the Nigerian Association
of Petroleum Explorationists(NAPE) webinar seminar series titled:
‘The Impact of COVID-19 on the Nigerian Oil and Gas Industry-The
Way Forward held yesterday.
This was even as it warned contractors, suppliers and companies
against inlated, over bloated and unrealistic contract figures.
Kyari, who was the guest speaker at the webinar, frowned at the
activities of some of its partners, especially indigenous oil
companies that are producing oil at a very high cost of about $93
per barrel while some others are producing same at a relatively
cheaper cost.
‘‘The era of some of our partners producing at a very high cost
will no longer be acceptable to us anymore. It is either they
become more efficient at what they are doing by cutting cost or be
ready to be shown the way out.
‘‘If they are not ready to be cost effective, then we may have
no other option than to cancel those contracts and give them to
those that can manage and produce at a relatively cheaper cost.
This is business and we cannot afford to run same like a charity
organisation’’
The NNPC boss lamented that the high cost of production in the
industry was unacceptable and was as a result of a number of
factors, some of which included; structural inefficiencies that
exist in the system and processes, environmental factors which
every contractor factors in while doing business; be it risk as it
relates to human resources and materials.
He noted that every cost on the list of business has a premium
that is related to our operating environment, insisting that those
premiums are much exaggerated and not reflective of the realities
on ground because suppliers, contractors and companies were only
taking advantage of such to hike contract cost.
Kyari, while specifically calling out indigenous companies in
this unwholesome act, said the NNPC in its several dealings with
them have observed a list of governance structure and processes
that are not significant and is now whipping on International Oil
Companies (IOCs), eventually resulting into producing oil above its
actual cost.
The NNPC GMD said the current vision is to achieve a $10 per
barrel industry cost, adding that for these to happen companies
must do so many things to arrive at that cost.
According to him, part of what should be done to achieve that
target is for stakeholders to be more cost conscious, plan better,
more realistic, and prudent and the appropriate leadership to drive
the focus.
He assured that the attainment of a $10 per barrel by 2021 was
possible; adding that such would enable the country to meet its
three million barrels per day (bpd) and 40 billion oil reserve
targets in a seamless manner.
He regretted that it was while discussions was ongoing among
stakeholders to see how the cost of oil production could be reduced
that the coronavirus pandemic hit the global stage, forcing oil
price to an oil time low of about less than $10 per barrel.
He said the coronavirus pandemic has clearly proven to oil
producers that the commodity could actually sell for less than $10
per barrel, adding that the country cannot continue to produce if
something was not done about the cost.
He said the emotions should be shoved aside because oil producer
that is not ready to produce at around $10 per barrel was not in
tune with current market realities and must be ready to quit the
stage for those that are ready for the challenges ahead