NNPC’s Group Managing Director, Dr. Ibe Kachikwu made the suggestion on Monday at the 33rd Annual International Conference and Exhibition organised by Nigerian Association of Petroleum Explorationists (NAPE) in Lagos.
Kachikwu, represented by the Group General Manager, Nigerian Petroleum Investment Management Services (NAPIMS), Mr Dafe Sejebor, said one of the key strategies to keep the nation afloat is contract renegotiation. “We must renegotiate our contracts to reflect current market realities. If the cost/unit barrel remains exorbitant at current low prices, oil production becomes economically not viable; it will simply be left in the ground,” Sejebor said.
“Portfolios must be re-evaluated because now is the good time to optimise the company’s overall portfolio by restructuring capital allocation away from high-cost, lower-return projects,” he adds.
The GMD listed other survival strategies to include external financing, operational optimisation, review of fiscal terms, strategic merger and acquisition. Others, he said, are re-engineering business models, reduction in operating expenditure cost, and financial resilience.
Mr Chikwe Edoziem, president of NAPE said low crude oil price should be seen as an opportunity to be efficient at every point along the value chain of the industry. He said that the nation’s crude oil reserves, in the last five years had remained stagnant at 37 billion barrels, which was achieved in 2010.
Edoziem added that Federal Government target of 40 billion barrels by 2020 would remain a mirage if Joint Venture (JV), which is the country’s largest upstream arrangement in the industry, remained under-funded.
He urged government to give consideration to putting in place a self-adjusting fiscal regime that would take cognisance of the vagaries of crude oil price. “Such fiscal regime should be structured to favour exploration work in the frontier areas like Dahomey Basin, Offshore Lagos, and Anambra Basin. And the unexplored deep opportunities within the high pressure/high temperature regime to meet our reserves replacement goals,” NAPE president said.
According to him, other emerging and worrisome development is the regulatory uncertainty and the sanctity of contractual and fiscal terms, and over tax. “We are witnessing Nigeria’s crude oil reserves fast depleting because funding has been languid. And concerted effort has not been made to encourage exploration to meet our reserves replacement goals,” he added.
By Olisemeka Obeche