Nigeria’s Oil Production Costs Spike With N785bn Yearly Overhead

NNPC’s Group Managing Director, Mele Kyari, disclosed that the highest personnel cost in the oil and gas sector remained in Nigeria, a development, which he said, was unacceptable.

With Nigeria’s oil industry incurring about 7.4 per cent of the national budget in personnel and overhead costs, alongside others like logistics, direct handling and lifting of crude, operators may have to do more to achieve the $10 per barrel (bbl) production benchmark set by the Federal Government.

 Indeed, many operators in the country spend about 50 per cent of their cash flow on personnel costs, which is why some still produce at a high rate of $93/bbl, even in a low oil price regime.

“There is nowhere any company will spend 50 per cent of its cash flow on human resources and survive. It is not possible,” Kyari had noted.

Beyond taxes, he noted that high expenditure driven mainly by high personnel, logistics and handling costs, push the unit operating price of oil to $20/bbl.