The average production cost for a barrel of oil in Nigeria has declined to just US$23 a barrel, Petroleum Minister Emmanuel Ibe Kachikwu told local media, adding that oil companies were not stopping there and were aiming to reduce this further, to US$15 a barrel.
Oil exports are the largest single source of oil revenues for the Nigerian state, and anything that makes these more appealing to buyers would help revenues grow. However, production costs are not the only factor at play when it comes to oil revenues.
Local communities continue to be a hotbed for militant activity as they see only a fraction of the money Nigeria receives for its oil exports. This, in turn, makes investors reluctant to commit more funds and other resources to field exploration and development in Nigeria.
As a result, Exxon, one of the companies with the longest presence in Nigeria, is now looking to sell assets there worth as much as US$3 billion. The move is also in line with the company's-and the whole oil industry's-new focus on quicker and higher return projects, which, for Exxon are clearly not in Nigeria. Kachikwu has denied the claim that Exxon is looking to bail.
On the other hand, French Total earlier this year launched production at a new offshore field, Egina, which has the capacity to produce up to 150,000 bpd of crude. Related: Midstream Outperforms In First Quarter
"We are still underdeveloped, underachieving and we are close to achieving the 4 million production target as we deliver 1.9 to 2 million barrels a day currently, but even at that why are we not taking over from the International Oil Companies, or produce a single oil firm that can transcend other West African countries," Kachikwu said.
Nigeria is taking part in the latest OPEC+ round of production cuts and it is supposed to be producing less than 1.9 million bpd. The country, exempt from the first round of cuts, was initially reluctant to join the agreement but Saudi Arabia convinced it to take part. It has yet to reduce its production to the quota set it by the cartel.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More