Yemisi Izuora/Ijeoma Agudosi/Agency Report
The price of oil, now in the neighborhood of $30 per barrel, is getting close to its production cost in Nigeria and soon may lead to the shutdown of some of the country’s oil fields, according to some energy executives and financial institutions.
Already some companies have signified intention to sell off their assets.
The Central Bank of Nigeria’s latest figures show that the price of Nigeria’s crude, Bonny Light, has dropped to $29.47 per barrel.
And several financial services companies, including Bank of America, Merrill Lynch, City Group, Goldman Sachs and Morgan Stanley say it could drop further to $20 per barrel. One oil executive, Alhaji Abdullahi Bukar said that the current price isn’t much more than it costs to extract the oil.
“The unit technical cost of many of our producers is not far from $30 per barrel,” said Bukar, the project director for the Uquo gas field development, a joint venture project by Frontier Oil Limited and Seven Energy. “So many companies are in trouble.”
According to Bukar, extracting a barrel of oil in Nigeria costs between $24 and $25 on average but sometimes will cost more. “For some fields, the production cost is well above $25, maybe $28,” he said. “For some fields it is well below $20 and $25. Many of the older fields … have got high production costs.”
The low oil price also threatens to delay several deep-water projects planned off Nigeria’s coast, long a mainstay of Nigerian production. Adeola Elliott, the CEO of Petrosystem Nigeria Ltd, said, “What [international oil companies] have done now is to just keep maintaining the facility they have now and producing what they [are] producing now. There is no more new investment.”
Nigeria is the leading producer of oil in Africa, and relies on its oil for most of its revenues from exports and its national budget. In the past several years its average production has ranged between 1.9 million barrels of oil per day and 2.3 million barrels per day.