The leadership of the Nigerian National Petroleum Corporation NNPC), yesterday, came under fire in Senate, over the high cost of oil production, resulting in a marginal profit of just $3 per barrel for the country.
This is coming amidst protests from senators against the $3 marginal profit being made on a barrel by the Corporation, they called on the Federal Government to get the nation’s economy diversified as quickly as possible.
Information on the high cost of oil production which is $21.2 per barrel, almost equaling $25 per barrel oil price benchmark fixed for the N10.509 trillion 2020 revised budget, came to the fore when officials of the Corporation appeared before the Senate Committee on Finance.
Trouble started when its Chief Operating Officer (Upstream), Yemi Adetunji was called upon by the Chairman of the Committee, Senator Solomon Olamilekan Adeola to explain why the cost of oil production in Nigeria is far higher than those of other oil-producing countries of the world.
According to Senator Adeola , while cost of oil production in Saudi Arabia is $4 per barrel and $3 per barrel in Russia, it is $21.2 per barrel in Nigeria , indicating very poor marginal profit of about $3per barrel based on new oil price benchmark of $25 per barrel .
The NNPC chief in his response , attributed the high cost of oil production to series of peculiarities ranging from security to crude oil theft .
However, virtually all the members of the committee dismissed his submission as untenable , declaring that required actions must be taken to address the abnormality .
Specifically, James Manager, in his remarks, said the security problem mentioned by the NNPC , was not tenable as similar problems exist in all other oil producing countries without high cost of production like Nigeria.
“Even the reason that he gave for the high cost of production per barrel I think they are not tennable because wherever oil is produced they have their own security challenge including even Saudi Arabia, Iran Russia, they have their own unique security issues how is our own so peculiar that our cost of production is up to $21 per barrel.
“You also mentioned administrative issue, which are those administrative issues why are we different from the rest of the world. These are issues that the national assembly are supposed to take up,”he said .
Another member of the committee ,
Senator Shaibu Gumau, declared that the existing $21.2 per barrel high cost of oil production and $25per barrel oil price benchmark is not commonsensical economically for the country .
” I can’t just believe even common sense cannot agree with this not even the national assembly. How could we expect a situation where cost of production of oil per barrel is $21.2 and the revenue is $25 per barrel.
“Yet other countries in the world not one, that their cost of production is not even up to $10 per barrel. It is difficult to understand and I dont think it is only National Assembly, even the executive themselves should sit down and ask themselves this question because we are watchdogs.
” Not because we are watchdog that is why we are disturbed but it has got to an extent that they too should be disturbed and there should be a solution and if not there should be an explanation that somebody can understand and agree but common sense can not understand this,” he lamented.
Jubrin Issa, also disagreed with the NNPC official over the high cost of oil production by aligning with his other colleagues.
He said: “I am disturbed because I expected the NNPC to dwell more on fixed costs but surprisingly you are talking about administrative cost, security, these are variables and even the fixed cost on the long run are also variables which you can also work on them.”
However, the Minister of State for Finance , Clement Agba, intervened by explaining to the committee members that peculiarities cited as reasons for the high cost of oil production, were real .
According to him, the North Sea production cost is higher than that of Nigeria and that as an insider , details of the $21.2per barrel oil production is well calculated.
Aside high cost of oil production , the NNPC officials , were also challenged by the committee to be more opened with their federally funded projects , the totality of which N484billion is voted for in the revised budget.
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