Fred Itua, Abuja
The Nigerian National Petroleum Corporation (NNPC), yesterday, came under fire as the Senate flayed the high cost of oil production and the $3 marginal profit made on a barrel of crude oil by the corporation for the country.
Information on the high cost of oil production which stood at $21.2 per barrel almost equaling the $25 per barrel oil price benchmark fixed for the N10.509 trillion 2020 revised budget came to the fore when officials of the NNPC appeared before the Senate Committee on Finance.
Trouble started when the NNPC’s Chief Operating Officer for Upstream, Yemi Adetunji, was asked by the Chairman of the Committee, Senator Solomon Adeola to explain why the cost of oil production in Nigeria was higher than those obtained in other oil producing countries.
According to Adeola, while cost of production in Saudi Arabia is $4 per barrel and $3 per barrel in Russia, it is $21.2 per barrel in Nigeria, resulting in a marginal profit of about $3 per barrel based on new oil price benchmark of $25 per barrel.
Adetunji in his response linked the high cost of oil production to external factors like security and crude oil theft.
His submission did not, however, go down well with the senators who dismissed his argument as untenable urging that actions must be taken to address the abnormality.
But James Manager said the security problem mentioned by the NNPC was not tenable as similar challenges exists in other other oil producing countries without a hike in cost of production like in Nigeria.
“Wherever oil is produced they have their own security challenges, including Saudi Arabia, Iran Russia; they have their own unique security issues. How is our own so peculiar that our cost of production is up to $21 per barrel.
Senator Shaibu Gumau declared that the current $21.2 per barrel cost of oil production and $25per barrel oil price benchmark was not economical for the country.
“Even common sense cannot agree with this not even the national assembly. How could we expect a situation where cost of production of oil per barrel is $21.2 and the revenue is $25 per barrel. Yet in other countries their cost of production is not even up to $10 per barrel. It is difficult to understand and I don’t think it is only National Assembly, even the executive themselves should sit down and ask themselves this question because we are watchdogs.
“Not because we are watchdog that we are disturbed, but it has got to an extent that they too should be disturbed, there should be a solution and if not there should be an explanation that somebody can understand and agree. Common sense can not understand this,” he said.
Jubrin Issa, also disagreed with the NNPC official over the high cost of oil production by aligning with his colleagues.
He said: “I am disturbed because I expected the NNPC to dwell more on fix costs, but surprisingly you are talking about administrative cost, security, these are variables and even the fix cost on the long run are also variables which you can also work on them.”
Minister of State for Finance, Clement Agba, however, intervened by explaining to the committee members that peculiarities cited as reasons for the high cost of oil production were real.
According to him, the North Sea production cost is higher than that of Nigeria and he said as an insider he knew that details of the $21.2per barrel oil production was well calculated.
Aside high cost of oil production, the NNPC officials , were also challenged by the committee to be more open with their federally funded projects, the totality of which N484billion is voted for in the revised budget.