Nigeria’s high oil production costs, reaching $30 per barrel, are primarily attributed to substantial investments in pipeline security within the volatile Niger Delta region. This cost is significantly higher than the global average and dwarfs the $10 per barrel production cost in Saudi Arabia. The elevated expense stems from the need to protect crucial infrastructure from theft and vandalism, necessitating a comprehensive security overhaul encompassing collaboration with government agencies and local community surveillance groups. This approach replaces the less effective reliance on traditional policing and aims for long-term stability through community involvement and job creation. While the current cost remains high, the NNPC anticipates a gradual decline as the security situation stabilizes and investments yield sustained results. This figure represents a decrease from the $40 per barrel reported earlier in the year, signaling initial success in cost reduction efforts.
The security strategy implemented by the NNPC focuses on creating a sustainable system by engaging local communities in pipeline protection. This model differs from previous approaches that relied solely on policing, which proved inadequate in addressing the complex security challenges in the Niger Delta. By incorporating local communities, the NNPC fosters a sense of ownership and responsibility, leading to more effective surveillance and a reduction in pipeline disruptions. This collaborative approach also generates employment opportunities within the communities, further contributing to stability and reducing the incentive for illegal activities. The NNPC expresses confidence in this model’s long-term sustainability due to the integral role played by community members, who are directly invested in safeguarding the infrastructure that benefits their livelihoods.
Regarding the Dangote Refinery, the NNPC clarified that crude supply arrangements will be governed by commercial principles, not government mandates. The refinery, being a private commercial venture, retains the flexibility to source crude from both domestic and international markets. While the NNPC acknowledges the importance of balancing crude supply from within Nigeria, it emphasizes a commitment to free-market principles. The government aims to avoid imposing regulations that could hinder the private sector’s operational autonomy. Any future increase in Nigerian crude supplied to the Dangote Refinery will depend on mutually agreed-upon commercial terms, ensuring a fair and competitive market environment.
Nigeria is actively pursuing production growth, targeting 2.06 million barrels per day by 2027, with current production already showing an upward trend. Progress is evident in the recent increase from 1.56 million barrels per day in March to 1.63 million barrels per day, including condensates. The NNPC aims to reach 1.9 million barrels per day by the end of the year, demonstrating a commitment to maximizing production capacity. Concurrently, Nigeria plans to boost gas production from 7 billion cubic feet to 10 billion cubic feet by 2027, further solidifying its role as a major energy producer. These ambitious targets underscore Nigeria’s focus on leveraging its natural resources to drive economic growth and meet both domestic and international energy demands.
The NNPC is currently reviewing its strategy for state-owned refineries, acknowledging the challenges faced in previous revitalization attempts. Investments in new technologies have not yielded the expected results, and complexities arising from the age and prolonged inactivity of the refineries have hampered progress. The review process, expected to conclude by the end of the year, will explore various options, including potential sales, to determine the most viable path forward. This comprehensive evaluation reflects the NNPC’s commitment to optimizing refinery operations and ensuring their long-term viability. The outcome of this review will shape the future of Nigeria’s refining sector, potentially leading to significant changes in ownership and operational strategies.
The NNPC highlights the global need for equitable energy investment, particularly in Africa, where millions lack access to reliable power. The current energy transition, while essential, has led to delayed investments in traditional energy sources, contributing to global supply tightness. This delay, coupled with slower-than-anticipated progress in renewable energy development, has created an imbalance between supply and demand. The NNPC emphasizes the importance of a balanced approach that addresses both immediate energy needs and long-term sustainability goals. Supporting OPEC+ decisions to rebalance the market, the NNPC views these measures as crucial for safeguarding the interests of both consumers and suppliers. The company advocates for a global energy system characterized by equity and balance, ensuring access to reliable energy for all, while simultaneously pursuing the transition to cleaner energy sources.
