Ibe Kachikwu, Minister of State for Petroleum Resources, says Nigeria will rather stop production of crude oil than keep doing it at very high cost.
Kachikwu made the comments on Monday at the Nigeria Annual International Conference and Exhibition, organised by the Society of Petroleum Engineers in Lagos.
He said many countries around the world have managed to reduce their production cost over the years but Nigeria’s has remained “stubbornly” high.
“When you look at the cost of production in Nigeria, it remains blatantly high. Our cost per barrel today is about $27 per barrel for JV (joint venture) fields,” he said.
“In Saudi Arabia, it is about $9. So we are way apart in terms of cost that anything that happens will hit us very hard.
“Even though we have been singing over the last two years that we need to drive cost down, the current figure that I still have, showing me the numbers of last year, have not shown me a major dramatic reduction in the cost of production.
“There is no way this country will produce oil at this sort of swelling prices that we see; there will be no margins left for this country.
“For me, you rather leave the oil in the ground than produce at a cost that doesn’t make sense. So, cost is going to be a very high driver. So that is certainly one area we are focusing on; we are working collaboratively with oil companies.
“But let’s make no mistake about it: If we cannot negotiate it down, we will compel it or we will stop the production; it does not make any sense.”
Kachikwu said that only oil companies who are able to drive down costs will be given favourable consideration in the oil sector, going forward.
According to Bloomberg, the price of a barrel of crude oil hovers around $52.5 as of Monday.