The Nigerian National Petroleum Corporation (NNPC) has denied insinuations that government was just keen on raising money through the marginal Field bid process.
Group managing director of the corporation, Mallam Mele Kyari, who stated this yesterday at the Nigerian Association of Petroleum Explorationists (NAPE), Webinar Series, said the whole idea was to stimulate and energise local industries, create job opportunities and sustain indigenous operations.
Kyari, said government is determined to continue with the process, because the fields have been dormant for between 30 to 40 years.
He said that only proper fiscal framework can facilitate and accelerate new oil field licensing round bid in the country.
According to Kyari, without legal framework, bid round may not work, adding that the industry is moving ahead for opportunity to close the issues around Petroleum Industry Bill.
Speaking on the theme, “The Impact of COVID-19 on the Nigerian oil and gas industry – The Way Forward”, he said the industry has not properly monetised resources in the last 15 years despite various government interventions.
He said currently it is only the NNPC that has sustainably proceeded with exploration activities and building reserves. The GMD also observed that cost of production has remained a big issue in the industry and largely threatening operators.
“When we took charge, we knew all along that our cost of production was high and such cost is not acceptable, as a result of lots of factors including structural inefficiencies in our processes.
“There are also issue of environmental consideration. Contractors will factor all associated risks for doing business here in terms of human resources, materials or whatever you can think of. Every cost has a premium that’s related to our environment.
“Those premiums are so exaggerated, it is not true. Suppliers and contractors have taken advantage of it to hype the cost in this country and that’s the reality.” he said.
He warned that any company that do not operate at $10 per barrel cost of production by 2021 will be made to shut down, noting that the Covid-19 pandemic that brought about oil glut in the international oil market made NNPC to sell crude oil with discount and this reduced the country’s expected revenue.
This he said has made NNPC to have a rethink to insist on cutting down cost of production. According to him there are a lot of unexplainable activities going on in the oil and gas industry and the experiences of the challenges of Covid-19 made it possible for NNPC to take a look at some services that they can discard.
Kyari said the time has come to infuse cost discipline, shade operational inefficiency and refocus only on projects that is revenue driven. “We will do away with inherent inefficiency and deploy technology to reduce cost” he said.