Nigerian Senators has on Monday called on the federal government to get the nation’s economy diversified as quickly as possible to avoid a total meltdown of the country.
They also kicked against the revelation by the management of the Nigeria National Petroleum Corporation ( NNPC), that the corporation makes a marginal $3 profit per barrel in oil production.
Information on the high cost of oil production which is $21.2 per barrel, almost equaling $25 per barrel oil price benchmark fixed for the N10.509 trillion 2020 revised budget, came to the fore when officials of the corporation appeared before the Senate Committee on Finance.
Trouble for the Nation’s cash cow started when its Chief Operating Officer ( Upstream) , Engineer Yemi Adetunji was called upon by the Chairman of the Committee, Senator Solomon Olamilekan Adeola (APC Lagos West) to explain why cost of oil production in Nigeria is far higher than those of other oil-producing countries of the world.
According to Senator Adeola, while the cost of oil production in Saudi Arabia is $4 per barrel and $3 per barrel in Russia, it is $21.2 per barrel in Nigeria, indicating very poor marginal profit of about $3per barrel based on new oil price benchmark of $25 per barrel.
The NNPC COO in his response attributed the high cost of oil production to series of peculiarities ranging from security to crude oil theft.
But virtually all the members of the committee dismissed his submission as untenable, declaring that required actions must be taken to address the abnormality.
Specifically, Senator James Manager (PDP Delta South) in his remarks said the security problem mentioned by the NNPC COO, was not tenable as similar problems exist in all other oil-producing countries without high cost of production like Nigeria.
“Even the reason that he gave for the high cost of production per barrel I think they are not tenable because wherever oil is produced they have their own security challenge including even Saudi Arabia, Iran Russia, they have their own unique security issues how is our own so peculiar that our cost of production is up to $21 per barrel.
“You also mentioned administrative issue, which are those administrative issues why are we different from the rest of the world. These are issues that the national assembly are supposed to take up”, he said.
Another member of the committee, Senator Shaibu Gumau (APC Bauchi South), declared that the existing $21.2 per barrel high cost of oil production and $25per barrel oil price benchmark is not commonsensical economically for the country.
“I can’t just believe even common sense cannot agree with this not even the national assembly. How could we expect a situation where cost of production of oil per barrel is $21.2 and the revenue is $25 per barrel?
“ Not because we are watchdog that is why we are disturbed but it has got to an extent that they too should be disturbed and there should be a solution and if not there should be an explanation that somebody can understand and agree but common sense can not understand this”, he lamented.
Senator Jibrin Issa ( APC Kogi East), also disagreed with the NNPC official over the high cost of oil production by aligning with his other colleagues.
He said: “I am disturbed because I expected the NNPC to dwell more on fixed costs but surprisingly you are talking about administrative cost, security, these are variables and even the fixed cost on the long run are also variables which you can also work on them”
However the Minister of State for Finance, Clement Agba intervened by explaining to the committee members that peculiarities cited as reasons for the high cost of oil production, were real.
According to him, the North Sea production cost is higher than that of Nigeria and that as an insider, details of the $21.2per barrel oil production is well calculated.
Aside from high cost of oil production, the NNPC officials, were also challenged by the committee to be more opened with their federally funded projects, the totality of which N484billion is voted for in the revised budget.