PIB: Your production cost too high, Senate President tells International oil companies

January 28, 2021

President of Senate, Ahmad Lawan, has expressed concern over high exploration cost being claimed by International Oil Companies involved in joint ventures operations with Nigeria.

To mitigate this, he said the National Assembly was determined to ensure that the cost was reduced to a tolerable level in the course of the passage of the new Petroleum Industry Bill (PIB) presently before it.

Lawan made the disclosure, on Thursday, while playing host to a delegation of Oil Producers Trade Section (OPTS).

The team was led by Chief Executive Officer of Total Exploration and Production in Nigeria, Mike Sangster.

President of the Senate who gave a comparative analysis of the cost of production of a barrel of crude in Nigeria as against its counterpart in the Organisation of Petroleum Exporting Countries of Saudi Arabia insisted that something reasonable must be done by the IOCs in Nigeria.

He said: “The cost of production in Nigeria is a major concern in the oil industry. My colleagues in the committees that are oil and gas-related know better.

“But from the little I understand, when Saudi Arabia maybe spends $5 dollars (USD) to produce a barrel, we spend about $30 dollars (USD) to produce the barrel in some cases.

“The time has come for us to ensure that the cost of production is beaten down to a more meaningful and profitable production cost.”

Senator Lawan equally canvassed for a better relationship between the upstream players in the oil sector, particularly the multinationals and their host communities.

“I believe that the Petroleum Industry Bill, making provision for funds to go into the host community funds, would probably this time around getting us a better deal with the communities.

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“We must do everything possible together to ensure that the host communities benefit wherever they are supposed to benefit, not only the host community development fund but in the Niger Delta Development Commission (NDDC) and other areas of government intervention – the Amnesty Programme and Ministry of Niger Delta Affairs.

“How do the host communities benefit, because we need to stabilise those areas so that we have cheaper production costs.”

While expressing strong reservation about the low profile of foreign investment in the country, he, however, assured the IOCs of a better deal.

“In the last 20 years, investments coming into Nigeria and this industry have been so dismal and so small compared to the size of what we have in Nigeria, maybe due to lack of a legal framework – the PIB.

“So, we are very conscious of ensuring a balance and equilibrium between our interest as a people and a country, that we should have all the benefits accruing from your operations.

“We need to help you by creating that kind of environment where you’re able to argue and get the investments to flow into Nigerian, instead of elsewhere. Let me also add, that at the end of the day, this is going to be balanced legislation.”

“For us as a country, we will not do anything that would jeopardize the chances of our oil industry competing favourably with other climes.

“So, I want to assure you that we would look into those issues of concern to you, and we would do exactly what we think will be in the best interest of Nigeria and also in the interest of the OPTS.”

Sangster who led the delegation told Senator Lawan that the purpose of their visit was to seek the cooperation of the National Assembly for a better deal for the multinationals as deliberations on the PIB continued.

He said: “On behalf of all of the industry and my colleagues, I want to say that we duly support the government’s effort to drive through the Petroleum Industry Bill.

“We think it is really important that there’s an updated framework for the industry.

“In our view, we are looking for something that will contribute to Nigeria, which will bring investment to the country and growth to the economy, and obviously jobs to the Nigerian people.

“We are looking for something that will protect our existing investments, and also unlock opportunities so we can further grow our businesses and production.

“We need to find ways jointly to try and reduce what we see as the cost premium of operating in Nigeria, so we are looking at ways where the PIB can help there.

“And I think many people have mentioned over the last few days, the importance of gas to the country, and move of transition towards a diversified gas-based economy, let’s say by removing some of the bottlenecks in the value chain and establishing a more free-market gas pricing regime,” he said.

Other members on the visiting delegation include; Richard Laing (Exxon Mobil); Rick Kennedy (Chevron); Roberto Daniele (ENI); Sam Ezugworie (Shell); and Bunmi Toyobo (Shell).


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