Oil Price Crash: Nigeria Independent and Marginal fields Producing at $5/barrel loss

As oil prices continue on the downward slide, Nigerian oil firms may be producing at up to $5/barrel loss, as average production costs for independent and marginal field producers is between $30 and $35/barrel.

Oil prices, recently, resumed their free fall, with Brent crude, similar to Nigeria’s sweet crude grade, falling 2.6 per cent to $31.34 a barrel following a 10 per cent rise on Friday, while U.S. oil shed 95 cents to $31.24.

To compound the producers’ woes, a significant proportion of what is produced is lost to oil thieves and pipeline vandals, which they insist are even more dangerous than the bearish run oil prices

Industry chiefs, who spoke with a National Newspaper Vanguard argued that the turbulence in the international oil market deserves urgent attention. Specifically, they insisted that the Federal Government needs to be talking with Nigerian producers very fast, if it must save indigenous companies from running aground and plunging the economy into deeper crisis than it is in already.

Impact on producers
Speaking on the impact of the oil crash on the producers, Chairman, Petroleum Technology Association of Nigeria, PETAN, Mr. Emeka Ene, said:

“Current price is below Nigeria’s average of between $30 and $35 per barrel. Most marginal field producers are producing above $30/barrel, and with pipeline vandalism activities, costs will shoot up by another $10/barrel, so oil production now is not sustainable.”

Ene, who spoke against the backdrop of oil crashing to 13-year lows of below $28/barrel last week, noted that the bearish run may soon fizzle out, whether shale or conventional oil is being produced at above $25/barrel. As such, the southward run is not favourable to any producer.

He also revealed that “a lot of Nigerian companies are out of work because they cannot compete with the multinationals, so government needs to have a serious talk with stakeholders in the industry.”

Oil theft, pipeline vandalism
Whether oil prices go bullish soon or not, other stakeholders feel that the benefits of the rise will be lost on Nigeria, if the government does not deal decisively with the twin incidence of pipeline vandalism and oil theft.

The President, Nigerian Association of Petroleum Explorationists, NAPE, Mr. Nosa Omorodion, maintained that “government needs to address the issue of oil theft and pipeline vandalism very fast because, even if price stabilises tomorrow or whenever, we will still not be able to reap the full benefits of that rise.”