The Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, has described Nigeria’s cost of producing a barrel of crude oil at $27 per barrel as too expensive, emphasizing that such a high cost cannot be sustained at a time of instability in the global oil market.
Mr Kachikwu speaking at the stakeholders’ consultative forum on the draft National Gas Policy and National Oil Policy in Abuja, stated that crude oil is still produced at $27 per barrel in Nigeria, adding that no decent country would produce at that amount at a period when oil price is unpredictable.
“They are lots of things we still need to address. Cost is a key issue. We are still at $27 per barrels. No decent country would produce oil at $27 per barrel at a time when the pricing is unpredictable. Again, we are going to try to get those figures below $18 per barrel,” he said.
The minister further disclosed that the country may quite existing joint venture cash call with the multinational oil companies as a way of opening up the industry to private sector full participation.
He stated that the Federal Executive Council (FEC) has gave its approval on the thorny issue that had bedevilled the country’s oil and gas sector because of government’s inability to meet its own financial obligations to such commitment.
Kachikwu restated that the federal government is committed to fully deregulating the downstream sector of the petroleum industry, but noted that it has to be a gradual process. He added that the government would continue fine-tuning the process until it gets to where it should be.
“At every given time in the history of every country, you will always have partial deregulation. The reason been that you have to catch up each time and make an amendment, and even if it is just one day, you might have some level of subsidy for that one or two days before it is removed,” he stated.
He pointed out that what is important is the goal post. “Where are we headed? Where we are headed is to try and free the industry, so that it can do its own rules, set its own prices itself. They are few mechanics that we still need to get in place properly. We can’t forget the fact that we still have foreign exchange challenges and that income to government is still very tight,” he noted.
Still speaking on the need to privatise the nation’s refineries, the minister warned that unless urgent steps are taken to immediately revamp the country’s refineries, they might become scraps in 2019, when the Dangote Refinery eventually comes on stream.
Kachikwu observed that the country has no other option but to ensure that the refineries work within the shortest possible time.
His word, “Refineries would have to work; it is really not an option anymore. And not only should they work, they have to work very quickly. The reality is that if we do not privatise and we do not concession — which is not what we are doing — then we have a responsibility to find private capital to get them to where they should be.”
“This is because if we do not get them to work, in 2019, I can assure you that if Dangote system works well, we would have scraps, we won’t have refineries, because by then it would be too late to do anything,” he stated.