Says $3 gain per barrel miserable
ABUJA – THE Senate on Monday grilled the management of the Nigerian National Petroleum Corporation, NNPC over the high cost of oil production, leading to a very low profit of $3 per barrel for the country.
The Senate was informed of 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 when officials of the corporation appeared before the Senator Olamilekan Adeola, All Progressives Congress, APC, Lagos West led Senate Committee on Finance.
Meanwhile, Senators, on Monday kicked against what they described as the $3 marginal profit being made on a barrel by the Corporation.
Consequently, the lawmakers have called on the Federal Government to as a matter of urgency, put in place, measures that would get the Nation’s economy diversified especially as a post Coronavirus, COVID- 19 measures.
Trouble reared its head for the NNPC when its Chief Operating Officer ( Upstream), Engineer Yemi Adetunji was called upon by the Chairman of the Senate Committee on Finance, Senator Adeola to explain why the cost of oil production in Nigeria was far higher than those of other oil-producing countries of the world.
Buttressing the argument that cost of oil production in Nigeria was higher than other countries, Senator Adeola said that while the 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.
Responding, the Chief Operating Officer of NNPC however attributed the high cost of oil production to a series of peculiarities ranging from security to crude oil theft.
In their various contributions, members of the committee dismissed the submission of NNPC as untenable, just as they said that required actions must be taken to address the abnormality.
In his remarks, Chairman, Senate Committee on Gas Resources, Senator James Manager, PDP Delta South said that the security problem mentioned by the NNPC COO was not tenable as similar problems exist in all other oil-producing countries without the high cost of production like Nigeria.
Senator Manager said, “Even the reason that he gave for the high cost of production per barrel I think they are not tenable because wherever oil is produced they have their security challenge including even Saudi Arabia, Iran Russia, they have their unique security issues how is our own so peculiar that our cost of production is up to $21 per barrel.
“You also mentioned administrative issues, which are those administrative issues why are we different from the rest of the world. These are issues that the national assembly is supposed to take up.”
Another member of the Committee,
Senator Shaibu Gumau, APC, Bauchi South who 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, said, ” I can’t just believe even common sense cannot agree with this not even the national assembly. How could we expect a situation where the 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 don’t 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.”
On his part, Senator Jibrin Issa, APC, Kogi East who also disagreed with the NNPC official over the high cost of oil production by aligning with his other colleagues, 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 who intervened by explaining to the committee members that peculiarities cited as reasons for the high cost of oil production, were real, stressed that 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 from the high cost of oil production, the NNPC officials were also challenged by the committee to be more open with their federally funded projects, the totality of which N484billion is voted for in the revised budget.