Stakeholders prescribe cost reduction strategies for crude oil production
Utilisation of local capacity, merger by indigenous oil firms, contract re-negotiation and implementation of oil and gas policies have been identified as measures that could help reduce cost of operation in Nigeria’s petroleum sector.
Stakeholders at a panel session during the Nigeria Annual International Conference and Exhibition organised by the Society of Petroleum Engineers, on Tuesday, believed that it would take the contribution of the Federal Government and oil companies to adopt strategies to reduce cost of production in the industry.
Recall that the Minister of State for Petroleum Resources, Ibe Kachikwu, had on Monday threatened that the country would halt oil production if the cost of operation remains high.
According to Kachikwu, “even though we have been singing over the last two years that we need to drive cost down, the current figure that I still have showing me the numbers of last year have not shown me a major dramatic reduction in the cost of production.”
Speaking at the event, the Acting Chief Executive Officer, Petroleum Commission of Ghana, Theophilus Ahwireng, said the journey since 2007 has been challenging yet beneficial, with production increasing from the previous 100,000 barrels of oil to the present 190, 000 barrels per day.
He said Ghana has been able to pass its petroleum industry bill to replace the 33 years petroleum law.
Ahwireng noted that the country has been able to reduce capital expenditure on projects from $2.9 billion to $1.9 billion by renegotiating some contracts and eliminating every unnecessary cost. “We have been working very hard to ensure we do not waste our resources, therefore we are very prudent in taking project decisions”.
According to him, the Jubilee Field, had opened new opportunities for Ghana to make the best out of the industry, and that since the oil discovery in 2007, the country had made 25 more discoveries of different types in the Tano Cape Three Points Basin.
He said it was an integrated project to produce gas and oil from the Gye Nyame, Sankofa and Sankofa-East Fields, adding that production was expected to come on-stream in the first quarter of 2017, and would produce about 40,000 barrels of oil per day.
The General Manager, West Asset, Seplat Petroleum Development Company Plc, Chima Njoku, argued that cutting cost does not translate to operational excellence.
According to him, “we may cost and end up polluting the environment.
As ways of costing cost, independent operators could decide to go into merger. Joining forces together would lead to reduction in the cost of production. Adopting corporate governance will help the companies to spend less”.
The Executive Secretary, Nigerian Content Development and Management Board (NCDMB) who was represented by the Director of Monitoring and Evaluation, Tunde Adelana said the country need to develop local capacity it its quest to reduce the cost of production.
According to him, without the development of local content, the country will not be able to achieve operational excellence. “We are working closely with the Minister of State for Petroleum Resources, Nigerian Port Authority (NPA), the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian National Petroleum Corporation (NNPC) for the engagement of local capacity to reduce cost of production”.
He added that the Federal Government must position the oil and gas industry for operational excellence.
He said that government agencies should lead the way on how business should be done in the country.
The Executive Secretary of the Petroleum Technology Development Fund (PTDF), Dr. Bello Gusau, decried the lack of jobs in the nation’s oil and gas industry for many of the Nigerians trained by the PTDF.
Gusau was represented by the General Manager, Nigeria Content and Industrial Collaboration, PTDF, Ms. Jacqueline Guyil, on a panel session.
He said: “Most of the people we have trained have not been absorbed into the industry because of the downturn in the industry.
“We can’t say we will stop training people because of the downturn. But we will have to focus on doing most of the trianing in-country and on the areas that are needed by the industry.”
“For the first time in the oil sector, the decline in the oil price into loss of jobs,” he said.
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