Nigeria Tightens Maritime Security To Drive Down Cost Of Oil Production 

Osagie Okunbor, Managing Director, Shell Petroleum Development Company of  Nigeria | HR Magazine

Yemisi Izuora

Nigeria is taking serious efforts to boost maritime security as operators in the oil and gas industry considers other options following rising production cost.

Vice President Yemi Osinbajo, attributed the cost of providing security as driving up production cost per barrel in the country.

Oriental News Nigeria reports that major oil companies operating in the country, IOC’s have complained about huge cost of production in the country.

At the just concluded Nigeria Oil And Gas conference, NOG, chief executives of key oil majors identified Nigeria as operating the highest cost of oil production regime in the continent.

According to Osagie Okunbor, Managing Director, the Shell Petroleum Development Company, SPDC, the passage of the Bill may be a step to achieving cost reduction as he commended the National Assembly for robust engagement through the period of consideration.

Okunbor, said the absence of the Bill has caused serious set back for the industry.

He lamented the industry has been significantly challenged by insecurity which has led to consistent breach of the Trans Niger Pipeline, TNP.

According to him, reconciliation factor reveals that 50 per cent of crude oil passing through the asset is lost and only 44 per cent could only be accounted for.

Okunbor, observed that incentivizing the communities through the Fund will not only stop deferred production due to unrest but will empower them to be more productive.

He however, hoped that the outcome will address critical issues of plethora of taxes and royalties in the industry.

“I want to state that most government agencies when they need money will introduce various types of tax and royalties and compel oil companies to pay. At this point we hope that the PIB, will put a stop to this” he said.

On his part, Mike Sangster, Managing Director and Chief Executive Officer, Total Upstream Companies in Nigeria, said the engagement between NASS and operators was useful to speed up passage of the Bill.

Sangster, said there is need to stimulate Investment in the industry as Nigeria’s oil reserve would take up to 50 years to deplete.

He complained about cost of production adding that Nigeria is most expensive country to operate, as well as insecurity adding that oil majors spend much in providing security.

Speaking like his colleagues Rick Kennedy, Chairman and Managing Director, Chevron Nigeria/Mid-Africa said his company has reduced gas flare by 95 per cent, but the company is expecting to see the harmonised version of the Bill to be able to make further decisions.

Richard Laing, Chairman and Managing Director of Mobil Producing Nigeria Unlimited, expressed the hope that the Bill when finally harmonised will adress key industry concerns with regard to security, sanctity of contracts among others.

Laing, represented by Oladotun Isiaka, said the company has invested much in technology to enable it reduce production costs and improve on data gathering and feedback from producing assets.

Meanwhile, Osinbajo, who spoke in Abuja on Monday at the 4th annual Valuechain lecture and award, pointed out that for oil production cost per barrel to fall, cost of security has to be lower.

Represented by Minister of State for Petroleum Resources, Timipre Sylva, the Vice President said measures are being put in place by Nigerian Maritime Administration and Safety Agency, NIMASA, to check insecurity in Nigerian waters, adding that the petroleum industry must work in synergy with NIMASA for coordinated approach to the challenge.

He said the initiatives would tackle insecurity in the maritime sector and would in turn drive down production cost.

“Security is one of the main cost drivers in the industry and that is what we have been discussing. So if they are going to tackle security in the maritime sector they must work with the oil and gas sector for it impact Nigeria’s economy fully.

“This is because today the oil and gas sector is bedeviled by a lot of security issues which have brought up the cost of production to levels that are too high”, he added.

He pointed out that with the passage of the Petroleum Industry Bill, PIB, activities will pick in the industry, noting that for sustainability, the security challenge must be addressed.

He said Federal Government has ordered the reduction of Nigerian Port Authority charge and NIMASA fee in the petrol pricing template as measures to lower the cost and impact on Nigerians.

He said the government was working out ways to ensure that indigenous ship owners are patronized to grow local participation in the maritime sector.

Also speaking, the Director/CEO, Department of Petroleum Resources, DPR, Engr. Sarki Auwalu in his lead paper, pointed out that for hundreds of years, the maritime and the oil and gas industry have enjoyed Siamese-twin type relationship creating and sharing value together.

“As an example”, Auwalu explained, “the maritime industry is responsible for hauling oil and gas all around the world while oil and gas has fueled the maritime industry. Imagine about 700 million barrels of crude cargoes and 22 million tonnes of LNG are transported by over a thousand ocean going vessels from Nigeria to destinations across the globe annually!

“To put this into context, in 2019, the year before the global COVID-19 pandemic, according to the Nigerian Bureau of Statistics (NBS), the value of total foreign trade recorded for Nigeria stood at N36.1 trillion.

“This was a 14 percent increase over 2018, and the maritime industry was responsible for the transportation and facilitation of 90% of these trades. Meanwhile, of these trades, Petroleum and Petroleum Products account for about 76 percent of the export”, he added.

In his key note address, the Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mallam Mele Kyari said there are over 20,000 ships working for the oil and gas in the Nigeria waters with an annual expenditure of over $600 million in the upstream sector.

Represented by the COO, Gas and Power, Engr. Yusuf Usman, Kayri added: “The oil sector spend $3 billion on marine vessels between 2014 and 2018 of which 73 per cent was spent on crude boat, security and power supply intervention

“This reflects the huge potential in the sector as we aspire to grow our production to 3 million barrels per day. Without doubt, the potential of the Nigeria blue economy is huge and remain largely untapped for the benefit of the country”.

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