NNPC, joint venture partners renegotiate technical production cost

There are indications that the technical production cost for producing barrels of crude onshore Nigeria may come down as the Nigerian National Petroleum Corporation (NNPC) renegotiates cost with its joint venture partners.

Maikanti Baru, group managing director of the NNPC disclosed this while wooing investors at the Petroleum Technology Association of Nigeria (PETAN) investor’s forum at the just concluded Offshore Technology Conference OTC, Houston, Texas USA.

“Specifically we have renegotiated most of our contracts, cancelled poorly structured contracts, shortened our contracting cycles, promote rig and vessel-sharing methodologies and most profoundly restructuring explored alternative funding models to sustain oil and gas investments,” he said.

The production unit cost presently is between$20 and $21 per barrel for onshore and about$33 for deepwater. Industry sources said that the average production cost for onshore should range between $17 and $18 per barrel but that the militancy in the Niger Delta has led to additional $2 per barrel technical cost.

While outlining the potentials of the industry, Baru said the opportunities in the Nigerian oil and gas sector could be divided into five (5) distinct areas across the value chain viz: Upstream oil and gas development, Gas Infrastructure and Power plants, Refineries, Downstream as well as Ventures and new business.

“Within the upstream segment, our plan is to increase our oil reserve base to 40billion oil barrels reserves by 2020 and therefore by implication at least 1billion barrels in should be added year-on-year till 2020.”

Based on its  Upstream growth plan, NNPC is looking to raise about US$13-US$16.5Billion over the next five (5) years in development of (7) giant gas fields                                      ($7-$9Billion), development of NPDC Upstream Assets ($6-7.5Billion).

Under Gas Infrastructure and Power Plants, investment opportunities to the tune of $9-$11 Billion exist in construction and laying 897Km of gas pipelines, ($2-$3Billion), design construction and operation of Western CPF ($2.6Billion), design Construction and Operation of Eastern CPF ($1.2Billion), and construction of 3 power plants  of 3150MW ($3-4.5Billion).

With respect to the refineries, he said the plan is to rehabilitate, and revamp existing four (4) refineries at the cost of $5-$6billion to raise their capacity to 700,000 barrels a day within the next few years

Barun said there are opportunities in the downstream segment, in the construction of new crude and product pipelines, pumping station upgrades, revamp of LPG plants, construction of new LPG storage tanks, filling stations, and equipment supply.

“The provision of coastal vessels and tugboats and other ancillary support services are equally areas that would yield high return on investment. We would require investments of about $3billion in this area,” he added.

In the Ventures and New Business Segment, the Corporation said opportunities exist for establishment of pipe mills, equipment leasing (Rigs, FPSOs) and operations & maintenance services.

Others in this aspect are construction of gas storage/Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) fillings as well as development of multi-specialist hospitals.

Olusola Bello