Checkout Magazine has learnt that Nigeria spends not less than N1.57tn on crude oil production monthly, translating to about N18tn annually, a development which industry operators described as too high.
Data collected from different sources, including the Nigerian Upstream Petroleum Regulatory Commission, indicated that the minimum any oil producer spends in extracting a barrel of crude oil in Nigeria is about $25.
The country’s average crude production stands at 1.4 million barrels per day, which means about $35m is spent daily to produce crude oil.
This is also an indication that $1.05bn would have gone into the production of the black gold in a month if $35m is multiplied by 30 days.
At an average exchange rate of N1,500 to a dollar, the amount would translate to N1.575tn.
In a year, the country would have spent at least N18.9tn on crude production should it maintain the average oil production of 1.4mbpd. This will impact its gains from crude sales significantly.
It was gathered that the cost of crude production ranges between $25 and $40 in Nigeria, an amount considered too high when compared with other oil-producing nations like Saudi Arabia where the cost is around $10 per barrel.
If the cost was $40 per barrel, the country would expend N2.52tn on crude production monthly.
In 2024, the Chairman of the House of Representatives Committee on Finance, James Faleke, lamented Nigeria’s $48 per barrel crude production cost, describing it as the highest in the world.
Faleke put the cost of producing crude oil per barrel at $9 in Saudi Arabia, $21 in Norway, and $24 in the United States of America.
He added that the rise in production costs was hurting the nation’s revenue.
According to him, if crude oil was sold for about $80 on the international market, only $32 would be available to the government to share with oil companies.
Faleke spoke in March at a meeting between the House Committee on Finance and the management of the Nigeria National Petroleum Company Limited on the cost of crude oil production in the country and its impact on government revenue.
“It is important that Nigerians understand the impact of production costs on the available revenue accruable to the Federal Government to execute its programmes in the national budget. The higher the cost of extracting a barrel of crude oil from the ground, the less funds available to the government and Nigerians.
“The committee has been given a total cost figure of $48.71 per barrel by the Federal Inland Revenue Service for calculation of Petroleum Profits Tax and Hydrocarbon Tax and this will also be used for profit calculations.
“Over the years, Nigeria’s cost of oil production (both capital costs and overhead costs) has continued to increase reaching new unprecedented highs of over $48 per barrel,” he said last year.
The Group Chief Executive Officer of NNPC, Mele Kyari, had blamed the high average cost of production per barrel on insecurity and other sundry issues.
“Security means everything to the oil and gas sector. Insecurity doesn’t stop the oil and gas industry from operating. They (oil companies) operate in Afghanistan, but what it does is that it adds a premium to the cost of production,” Kyari said as a guest speaker during the 2024 faculty of science lecture at the Obafemi Awolowo University, Ile-Ife.
The NUPRC disclosed that one of its action plans in 2025 is to reduce the production cost to $20 a barrel.
