State-owned Nigerian National Petroleum Corporation (NNPC) aims to scale down oil production spending by as much as between 33 and 41 per cent to attain a capped unit cost of $10 per barrel in order to remain competitive in the global oil market, where the output cost of an oil major like Saudi Arabia is priced between $4 and $5.
NNPC’s chief, Mele Kyari unveiled the ambition of the corporation to journalists in an address on Thursday, saying the firm had managed to keep running regardless of the current oil crisis and the downturn in the economy.
The balance of revenue inflow into the NNPC has been tremendously upset by the oil crash by approximately 65 per cent as the global oil market faced a record glut, and movement restrictions together with curbs placed on economic activities around the world hurt fuel demand.
At the moment, the corporation is struggling to find liquidity with the present downturn threatening its commitment to remit N1.27 trillion to the federation account April through December.
Economies, which produce oil cheaply, will remain competitive, Mr Kyari believes, but those doing so at unsustainable costs may struggle to stay in the market.
“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 renegotiation of contracts downwards and other business obligations, thus saving 40 per cent of the proposed budget and cost,” he said.
He declared that the NNPC had deployed policies that would make a unit operating cost of below $10 realisable and convenient for the upstream sector.
“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.”
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