NNPC Renegotiates Deep Offshore Rig Rate, Gets 72% Discount

Says unit technical cost for oil has dropped to $27/b from $70/b
Chineme Okafor in Abuja

The Nigerian National Petroleum Corporation (NNPC) yesterday said it has renegotiated its deep offshore rig rate from a staggering $580,000 to $164,000 per day, translating to a cost savings of 71.7 per cent.

It also stated that it achieved a 35 per cent downward review of rig rates per day for both swamp and land operations within its oil production portfolios.
The corporation’s Group General Manager, Public Affairs, Ndu Ughamadu, stated this in a statement he sent to THISDAY in Abuja.

Ughamadu said the Group Managing Director of NNPC, Dr. Maikanti Baru, who was represented by the Chief Operating Officer, Gas and Power of NNPC, Saidu Mohammed, at the 14th annual Aret Adams memorial lecture in Lagos, said these.

Baru said these cost reductions were also effected in NNPC’s Unit Technical Cost (UTC) for oil production, which he noted dropped from $70 per barrel to $27/b between 2014 and 2016.
By definition, a rig rate is a major cost element incurred by an oil and gas Exploration and Production (E&P) company in the course of drilling for oil or gas in deep offshore, shallow offshore, swamp, land areas or basins.

Baru however, declared that the various reductions would serve as incentives for investors to grow oil reserves in Nigeria, increase profitability and improve Return on Investment (ROI).
He added that these can also boost government revenue from oil production, as well as improve its commitment to developmental projects across the country.

“I am proud to announce that our UTC has significantly dropped from above USD70 per barrel in 2014, to about USD27 per barrel, as at year end 2016. Indeed, NNPC is committed to further driving down the UTC,” Baru said in the statement.

He reportedly solicited the support of all industry stakeholders to achieve more of such cost reductions and productivity, stating that there was an urgent need to link the oil industry with other sectors of the Nigerian economy.

According to him, although the increased oil production involved the cost factor and the commodity price, the NNPC had produced oil within the year with much efficiency.
He said: “Price may not be readily under our control, but we need to manage cost of production within the industry. Within the period we took over the reign of leadership in the corporation, we have been able to drive down cost to a very commendable level.”

Baru equally explained that to achieve the 40 billion barrels of crude oil reserves and a production of four million barrels per day that the government aspires to achieve by 2020, the country would need to increase its reserves by one billion barrels every year till 2020, while adding a minimum of 500,000 barrels of production to her daily capacity within the same timeframe.

“Considering our quest for revenue generation as a nation, it is a given that we need to increase our exploration efforts in order to sustain our reserve base and grow production,” Baru stated.
He charged industry stakeholders to invest in exploration activities, especially now that crude oil price has remained relatively low.

He said the NNPC would continue to make investments that would increase the national hydrocarbon reserves and daily crude oil and gas production.
In this respect, he added that the NNPC was committed to propelling the country’s power, industrial and agricultural sectors, through adequate provision of gas to power and sustainable feedstock to fertilizer and petrochemical industries.