Nigeria has reduced the unit technical cost (UTC) for producing oil to US$27 per barrel as of end-2016 from US$70 per barrel in 2014, Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), said in a speech on Thursday.
"With reduced cost of production, govt's share of economic revenue will improve which means reduced budget deficit," NNPC said on Twitter in updates of Baru's speech. Nigeria is also committed to raising the efficiency of its refineries so that by 2019, it will no longer import petroleum products, Baru noted.
NNPC has also renegotiated the rig rates for its deep offshore operations from US$580,000 to US$164,000 per day, the official said.
According to barrel breakdown graphics by The Wall Street Journal from early 2016, Nigeria had the world's third highest average cash cost - US$28.99 - to produce a barrel of oil or gas equivalent in 2016 behind the UK and Brazil.
In November 2016, Nigeria's Minister of State for Petroleum Resources, Emmanuel Kachikwu, said that the country would aim to further reduce the technical cost of oil production to US$18 per barrel, although he gave no specific timeframe for achieving this goal.
Nigeria's oil industry and economy have been suffering badly not only from the low oil prices but also from the persisting militant attacks on oil infrastructure that have crippled crude production. The sabotages reduced Nigeria's output from more than 2 million bpd at its highest point in 2015 to 1.4 million bpd last summer, the lowest production level in 30 years. Due to the militant violence, Nigeria was exempt from the OPEC production-cut deal, but since the cartel struck the agreement at end-November, Nigeria has been gradually lifting output, possibly undermining efforts by fellow OPEC members that are trying to cut.
On Thursday, Nigeria's Finance Minister Kemi Adeosun said that the country's oil production had risen to 2.2 million bpd, following a recent decline of attacks on oil infrastructure in the Niger Delta.
By Tsvetana Paraskova for Oilprice.com
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