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.
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.