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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Nigeria Can Produce Oil At $20 A Barrel

The Nigerian National Petroleum Corporation can produce crude oil at around US$20 a barrel, but there are plans to bring this even lower, to US$15 a barrel, the company’s group managing director Maikanti Baru told media.

"The more we bring down the cost, the more the money that comes to the federal government and into the pockets of state and local governments," Baru said.

Nigeria has pledged to keep its oil production at 1.8 million barrels daily after OPEC asked it to join the cut efforts to bring down the global inventory overhang. Yet independent local producers are eager to boost their production by 250,000 bpd by 2020. That’s part of a plan to bring Nigeria’s total to 2.5 million barrels daily. At such low production costs, the urge to expand production makes perfect sense.

The independents’ plans go counter to Nigeria’s pledge to support OPEC in its oversupply reduction efforts, but this doesn’t seem to have deterred the independents. Nigeria’s plans are for a total 700,000-bpd increase in production by 2020. How this will sit with OPEC is anyone’s guess, especially now, after the IEA warned that new non-OPEC supply would be enough to cover the growth in oil demand globally in the next five years. Related: Trump’s Trade Wars Could Spark A Massive Drop In Oil

Meanwhile, however, Nigeria is having serious trouble with the supply of refined oil products. The country has been suffering serious fuel shortages and has been negotiating with two consortia to overhaul its subpar refineries. Currently, the country imports billions of dollars’ worth of fuels because local refineries cannot cope with demand.

The overhaul was promised by President Muhammadu Buhari when he came into power in 2015, but since then there has been more talk than action on the issue. Meanwhile, capacity utilization rates have been falling, to reach 5.92 percent last November, from a high of 36.73 percent in January the same year – also not a very impressive figure.

By Irina Slav for Oilprice.com

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  • Kr55 on March 06 2018 said:
    Difference between cost to maintain production and to develop new projects of course. $20 is for maintaining current production, which is the case for many producers. But can't pump the same spot forever.

    File that dream of growth with Iraq's where they think they can get to 7M or whatever wacky number they were throwing out for the last few years.
  • Mamdouh G Salameh on March 06 2018 said:
    That would be great if the Nigerian National Petroleum Corporation (NNPC) could cut production costs of a barrel of oil to $20. This will certainly generate more revenues for the Federal government. However, the top priority of the government is to ensure that the extra revenues are not squandered as has been the case for the last few years.

    The government should allocate part of the revenues for investment in expanding Nigeria’s refining capacity so as to obviate the need for the country to pay billions of dollars for imports of refined products.

    Of course, it is up to Nigeria to add some 700,000 barrels a day (b/d) to its total production by 2020 since by then the OPEC/non-OPEC production cut agreement would have hopefully served its purpose and the global oil market could be tightening.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • The Cynic on March 06 2018 said:
    I am always cynical when it comes to these numbers - what does that $20 include? The industry would be in a far stronger place than it is even if they were producing at $35 per barrel. Bonny light is selling for over $66 according to the oil price page?

    If it's true they should be ok with releasing some more in-depth data.
  • John Brown on March 06 2018 said:
    Interesting that the Trend to lower production cost is going on everywhere. Even in Nigeria. The oil industry is in a position where it able to produce a lot more and lower cost, and artificially restricting production to try and keep prices higher. Interesting?
  • Neil Dusseault on March 07 2018 said:
    So, now Nigeria is stating that it can produce oil at $20/bbl...yeah right:
    Just like Saudi Arabia said they can still turn a profit at $10/bbl.

    If any of this were true, then how come in February of 2016 everyone was freaking out with WTI at a low of $26.05 (and Brent, among others, closer to $30+)? From the time oil sank into the $20s and back up into the $30s was a very short-lived time period.

    Then there is Russia...whose oil minister (Alexander Novak) has said repeatedly that they can do well with oil at $40/bbl forever. Yet they consistently team with OPEC's Saudi Arabian oil minister with oil in the $60s and the reality is they all want at least $70 on WTI.

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