Cost of crude oil production threatens Nigeria’s income ― Sylva

The Federal Government has expressed concern over the rising cost of crude oil production in the country, saying that if the trend continues, the nation may lack the adequate resource to fund developmental projects needed to improve the lives and well-being of the people in the near future.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, while speaking during the 9th Annual Practical Nigerian Content (PNC) Forum organised by CWC Africa in partnership with the Nigerian Content Development & Monitoring Board (NCBMD) in Yenagoa, Bayelsa state, said that the nation’s cost of producing a barrel of crude oil is one of the highest among member nations of Petroleum Exporting Countries (OPEC).

Sylva said the Federal Government under President Muhammadu Buhari is doing everything possible to increase the contribution of the oil sector to the Gross Domestic Product (GDP) of the country by guaranteeing the security of oil production.

He also noted that the Ministry of Petroleum Resources under his supervision has selected key priority areas to contribute to the improvement of production, reducing the cost of production of crude and the increase in the volume of the production capacity of the country.

He said: “The areas include the eradication of smuggling of PMS across Nigerian Borders; the Completion of Gas Flare Commercialisation Program; Increase of Crude Oil production to 3 million barrels per day and Reduction of the cost of Crude Oil production by at least 5 per cent.

“Other priorities include; the passage of the Petroleum Industry Bill; Increase of domestic refining capacity and implementation of the amended Deep Offshore & Inland Basin Production Sharing Contract Act. The key outcomes of these priority areas will be Job creation and Poverty Reduction, which are the cardinal aspirations of the Next Level Agenda of President Muhammadu Buhari’s Government. I ask for your maximum support and cooperation to achieve these priorities and other plans we would unfold in the course of time.”

On the local content drive of the Nigerian Content Development & Monitoring Board (NCBMD) under the leadership of the Executive Secretary, Engr. Simbi Wabote, Chief Sylva commended the board and declared that the Federal Government is impressed with its performance over the years.

He said: “At the Ministry of Petroleum Resources, we are proud of Nigerian Local Content achievements in the oil and gas sector. We are delighted at the various capacities and capabilities that have been put in place since the enactment of the Nigerian Content law.

“We are also proud that these achievements are well recognised in the continent to the extent that some African countries like Kenya, Congo Brazzaville, Uganda, Gabon and Angola have come to Nigeria in the past for mentorship and peer assistance on Local Content practice and implementation.

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“As you might recall, this administration had taken strategic steps to entrench Local Content implementation beyond oil and gas through the Presidential Executive Orders 03, 05 and others.

“We are also aware of the recent pledges by the Local Content Committees of the Senate and House of Representatives to extend the Nigerian Content Act to other key sectors of the economy. This is because we can all see the benefits so far realised from the implementation of Nigerian Content requirements in the oil and gas industry.

“While we applaud the exceptional work done by the wholly Indigenous Construction Company, Megastar Technical and Construction Company Limited, our overwhelming appreciation must go to President Muhammadu Buhari (GCFR) and the Federal Executive Council for the gracious and timely approvals which helped to speed up the completion of this project. This building serves as a strong attestation of Mr President’s love and commitment to the development of the Niger Delta Region and I look forward to bringing him to commission this edifice in no distant time.”

Also speaking, Mr. Victor Okonkwo, the Managing Director of Aiteo E&P Limited, operator of the 45% stake in OML 29 and the Nembe Creek Trunk Line (NCTL) OML 29 all situated within Bayelsa state, noted that the company represent a testimony of what local content and dogged entrepreneurship drive can achieve, saying in Aiteo nearly 98% locally staff and contractors are largely from the locality they operate.

He, however, noted with concern that one of the biggest challenges we face in our operations is the security of our pipelines and oil facilities.

“Our pipelines and flowlines are constantly vandalised by unscrupulous elements tagged ‘crude oil thieves’ attempting to cause economic sabotage to our Company and the people of this great country.

“Despite our efforts in raising NCTL uptime from 60% to over 80% since the acquisition, we have recorded more shutdown days in operations due to third party infractions for over 2 months this year compared to previous years. This has resulted in the loss of revenue and deferments estimated at about 4 million barrels so far this year. Also worrying is the amount of crude loss recorded even when the pipeline is operational, usually in the range of 25 to 35%. More worrying is that even when the perpetrators of these acts are caught and handed over to security agencies, we are yet to witness any conviction.

“Remember, Aiteo operates the NCTL which also serves 4 other Oil companies (Eroton, Newcross, Belema Oil and Shell) injecting into the pipeline, hence, when there are infractions on the line, these companies are also forced to shut down; resulting in economic losses for these companies also and the Federal Government by and large.

“Despite all these challenges, we have kept our commitment to NCDMB paying up to N1.52 billion in NCDMB fees and N1.5 billion as NDDC levies. In addition, Aiteo has spent over N3.6 billion in community support programs and projects; offered jobs to thousands of Nigerians and intentionally led inclusive participation of indigenous contractors in our business operations, from EPCM provisions, provision of marine equipment, civil works and manpower provisions.”

Earlier in his speech, the Executive Secretary of the Nigerian Content Development and Monitoring Board, Engr. Simbi Wabote noted that the Board’s 10 Year Strategic Plan is hinged on five (5) pillars and four (4) enablers. Each of the pillars and enablers is supported by strategic initiatives meant to propel the oil and gas industry towards 70% Nigerian Content by 2027.

According to Wabote: “With Technical Capability Development pillar of the plan, at last year’s PNC, we promised to support the establishment of at least one more modular refinery, participate in the LPG value chain, progress development of our industrial parks, and provide international sea time for marine cadets.”

He also announced that the board has secured approvals for the award of nine (9) contracts from the Federal Executive Council to progress work on the development of our industrial parks in Akwa Ibom, Bayelsa, and Cross River states.

“Our immense gratitude to His Excellency, President Muhammadu Buhari for backing our efforts to domicile and domesticate manufacturing in-country.

“We took up equity in the 12,000 barrels per day AZIKEL Hydroskimming Modular bringing to two (2) the number of modular refineries we have gone into partnership with. The first being Waltersmith Modular Refinery. In the area of the gas value chain, we have secured approval for partnership in the establishment of a 400,000/year Type-3 LPG Cylinders manufacturing plant at Polaku, Bayelsa state and to establish a 168,000MT per annum loading and off-loading LPG terminal in Koko, Delta state.

“We also got approval for the establishment of a 48,000 litres/day facility in Port Harcourt, Rivers state for the production of base oil from used engine oil. With these partnerships, we aim to reverse the capital flight currently associated with these products as they are all imported. The estimated turnover from these 3 partnerships is $360millionper year.”

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