The President, Petroleum Technology Association of Nigeria (PETAN), Engr. Wole Ogunsanya on Wednesday declared that the cost of providing services in Nigeria’s oil and gas industry is relatively the cheapest on the African continent.
He spoke at a Townhall Session at the 14th Practical Nigerian Content (PNC) Conference and Exhibition at the Nigerian Content Tower (NCT), Yenagoa and provided a detailed analysis of project costs across Africa and elsewhere.
Engr. Ogunsanya insisted that a distinction must be made between the capital expenditures (CAPEX) of the oil industry and operating expenditures (OPEX), stressing that Nigeria’s CAPEX rates were arguably the lowest in Africa. He attributed what some industry observers refer as Nigeria’s uncompetitive costs of production to challenges of evacuation, security costs and the activities of portfolio companies that habitually manipulate their clientele.
According to him, PETAN, the umbrella body of reputable indigenous technical oilfield service companies, has been analysing production costs in different countries over time, using capital expenditure (CAPEX) and operating costs/expenditure (OPEX), and, in the case of Nigeria, carefully identifying cost elements at successive stages of oil and gas production.
In his words, “The number one cost driver in Nigeria’s oil and gas industry operations is evacuation of crude oil and gas. Our pipelines are vandalised, and some companies use vessels, barges to move crude oil, at a cost of US$12 per barrel.” Costs include payments to security agents as guards or escorts.
The PETAN boss, who is also Chairman/Chief Executive Officer of Geoplex Drillteq Limited, said whereas contracting a land rig in India costs as much as US$60,000 per day, the same services in Nigeria cost as low as US$30,000 for the same duration. Part of the explanation for the relatively lower costs in Nigeria, he noted, is that “Local content policy and practice in the industry here subsidises oil and gas production” in ways that might not be very apparent to some analysts, he said.
He lamented that some portfolio companies in Nigeria, companies without the requisite operational assets often constitute another grievous dimension in the escalation of costs. PETAN, he revealed, is “aware of portfolio companies that had previously obtained the Nigerian Content Equipment Certificate (NCEC), became registered on NIPEX (Nigerian Petroleum Exchange) and had services, projects awarded to them.”
The Presidential Directive on Local Content Compliance Requirements introduced in March 24, 2024, had mandated that such portfolio companies be barred from participating in the Nigerian oil and industry, while companies bidding on projects must demonstrate genuine, tangible capacity to perform the work independently.
Ogunsanya called on the NCDMB to allow specialists in PETAN to provide guidance on equipment required for different industry operations. He also wants the Federal Government and the NNPCL to facilitate efforts of PETAN to establish the cost of projects in other markets, to enable the Association advise the authorities on trends globally, “so when any of the IOCs or even indigenous companies say we are doing a US$5 billion project to produce 100,000 barrels, we have a basis for comparison.”
