The Federal government has targeted a 30 percent reduction in the cost of crude oil extraction, in a bid to ensure effective cost management in Nigeria’s oil sector.
Timipre Sylva, Minister of state for petroleum resources disclosed this in Abuja on Tuesday, stating that ensuring effective-cost management in the oil sector is critical to creating a sustainable economy as the sector has remained the mainstay of the nation’s economy.
Sylva said that the effective Management of the cost of production of crude oil is necessary to shore up revenue allocated to execute government projects as well as fast track inter-sectorial linkages to enhance value chain.
“In this regime of $50-$60 per barrel price of crude oil, a cost of over $30 per barrel is unsustainable and that is why we need to come up in this program with what we need to do to reverse the trend,” the minister remarked.
“In addition to reducing the cost of production, we have recognised the importance of reducing the contract approval cycle, enhancing transparency, reducing barriers to entry and regulatory transaction cost as necessary ingredient for optimizing the conducive business environment,” he explained.
The minister who was represented by Moses Olamide, chief of staff to the minister, at the workshop on effective cost management in the oil and gas sector, organized by the Petroleum Technology Development Fund in conjunction with the Quantity Survey Registration Board of Nigeria, said that various cost drivers such as insecurity in the oil-producing regions, long contracting cycle, governance structure, fiscal policies, local content, and regulatory issues among others, are unique to the Nigeria economy and therefore requires sustainable solutions.
“To optimize cost, we must deploy flawless and disciplined cost control practice, embrace value improving culture before sanctions, Target price budgeting backed by historical metrics and benchmarking, as well promoting good risk analysis”.
Bello Aliyu Gusau, executive secretary, petroleum technology development fund, in his remarks said that the workshop tended to create an avenue to address the current trend as the cost exploration and production of crude oil are increasing exponentially with the decline in government and other producer revenue.
“From our industry skill and competency gap analysis, the issues of cost engineering, cost control, cost estimation as well as other cost management are amongst the areas of greatest challenge in the oil sector”.
Gusau further said that the workshop was in furtherance of the government’s vision to reduce the cost of crude oil production adding that the PTDF was willing to partner and with industries in finding solutions to critical issues affecting the full realization of the government’s vision for the sector.
“We are prepared to work with professional bodies and academia towards developing home-grown solutions to support the industry efforts to stay competitive through effective cost management”, he said.
Babatunde Raji Fashola, minister of works and housing, in his remark stressed that the Buhari’s administration has placed a high premium on the projects and administrative cost reduction in the running of government operations.
“The involvement of Quantity Surveyors in the oil and gas sector such as exploration, pipeline installation, construction of roads and bridges, heavy engineering and engineering services with other professionals will ensure efficient allocation and utilization of resources, probity and value for money in our infrastructural development in Nigeria”.
He further stressed that in ensuring an optimal result in the nation, there must be synergy among relevant professionals, to give room for a division of labor and specialization rather than isolation.
Obafemi Onashile, President, Nigeria Institute of Quantity Surveyors (NIQS) in his remark said that the current strategy of the institute is aimed at driving reforms in the construction and oil and gas sector.
“This collaboration today will enhance a fairer competition and create more a more effective contractual control in the oil and gas sector as the sector has been limitedly competitive”.
“Contractual related issues will be a thing of the past with NIQS involvement in oil and gas”, he said.
