Stakeholders have proffered solutions to the rising cost of production in the nation’s oil and gas industry.
They suggested the stoppage of numerous levies by agencies of the government which are responsible for 10 percent of the cost of production in the industry.
The agencies which oil companies pay levies to, are Niger Delta Development Commission (NDDC) to which three per cent of the companies budget is given, Nigerian Content Development Board (NCDMB), one percent of the contract awarded, and Educational Trust Fund.
The stakeholders also advised the government to sell off the refineries as they constitute drains on the nation’s purse. The four refineries, they said, have not refined a barrel of crude for over 15 years, yet workers collect billions of naira in salaries and allowances.
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Aside from these, they asked the minister of state for petroleum to tackle insecurity in the Niger Delta as there can be no proper production activities with the worsening security situation.
The issue with the rising cost of production, they argued, is not in staff cost but harsh investment environment, stating that no company has taken final investment decision (FID) on any new project in the last five years. The new investment will drive up production while increasing output will automatically reduce operational cost per barrel. Its simple economic theory they stated
Most companies including Chevron and Mobil don’t have any new project insight and that is not being addressed, they stated
Eddy Wikina, former managing director of Treasure Energy Resources and external affairs manager with Shell Nigeria Exploration and Production Company, said that most of the money paid to NDDC and NCDMB end up being used to settle politicians rather than doing serious jobs that will impact the lives of people of Niger Delta.
Another stakeholder who works with an oil servicing company, but does not want his name mentioned, said that the government must work on those that have constituted risks to the operations of the oil and gas industry.
President Muhammadu Buhari and Mele Kyari, group managing director of Nigerian National Petroleum Corporation (NNPC), have said the rising cost of oil production is now threatening jobs and profit in the sector.
The President, who dropped the hint at the 6th triennial national delegates’ conference of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) in Abuja, said that with the production cost hitting 46 percent, it was inevitable for the oil sector stakeholders to meet with a view to fashioning out the way out.
Kyari said since there was a need to cut down production, it meant that the industry would have to reduce its activities, and this will translate to downsizing the workforce.
The NNPC boss said since oil production cost currently stands at $35 and a barrel sells for $45, it means that the industry actually earns $10 per barrel. He said that as Nigeria cannot raise production, it is clear that fewer hands are required for production.
