The President of the Petroleum Technology Association of Nigeria (PETAN), Engr. Wole Ogunsanya, has stated that the cost of providing services in Nigeria’s oil and gas industry is relatively the cheapest on the African continent. He made this known on Wednesday during a Townhall Session at the 14th Practical Nigerian Content Conference and Exhibition held at the Nigerian Content Tower in Yenagoa. Ogunsanya gave a detailed analysis of project expenses across the region and beyond.
He stressed the need to clearly separate capital expenditure, known as CAPEX, from operating expenditure, OPEX. According to him, Nigeria’s CAPEX remains one of the lowest in Africa even though many people believe production costs are high. He explained that the issues often highlighted are linked to challenges in oil evacuation, security expenses, and the activities of portfolio companies that manipulate their clients.
Ogunsanya noted that PETAN has over time analysed the production costs of different countries using CAPEX and OPEX, and has also identified the specific cost drivers involved in Nigeria’s oil and gas operations. He said the biggest cost factor is the evacuation of crude oil and gas. In his words, “The number one cost driver in Nigeria’s oil and gas industry operations is evacuation of crude oil and gas. Our pipelines are vandalised, and some companies use vessels, barges to move crude oil, at a cost of US$12 per barrel.” These costs also include payments to security personnel who are engaged as guards or escorts during operations.
Providing a comparison, the PETAN leader, who also serves as Chairman and Chief Executive Officer of Geoplex Drillteq Limited, stated that renting a land rig in India could cost up to US$60,000 per day, while the same service in Nigeria costs as low as US$30,000. He said one of the explanations for lower service rates in Nigeria is that the local content policy indirectly subsidises oil and gas production, even though many people may not notice how this works.
However, Ogunsanya lamented that portfolio companies are contributing to unnecessary increases in cost. These are firms without the necessary equipment or operations capacity, but still secure contracts. He revealed that PETAN is “aware of portfolio companies that had previously obtained the Nigerian Content Equipment Certificate, became registered on NIPEX and had services, projects awarded to them.”
He explained that the Presidential Directive on Local Content Compliance Requirements, issued on March 24, 2024, mandated that such portfolio companies must be barred from participating in industry activities. Going forward, companies competing for projects must show tangible capacity and prove that they can deliver services on their own.
Ogunsanya appealed to the Nigerian Content Development and Monitoring Board (NCDMB) to allow PETAN specialists to help guide the industry on the type of equipment required for different tasks. He also urged the Federal Government and the Nigerian National Petroleum Company Limited (NNPCL) to support PETAN’s efforts to gather cost data from other markets. This, he said, would allow the association to advise authorities better whenever oil companies present project budgets. According to him, this would help provide a proper benchmark “so when any of the IOCs or even indigenous companies say we are doing a US$5 billion project to produce 100,000 barrels, we have a basis for comparison.”
The Townhall Session was moderated by the General Manager of Corporate Communications at the NCDMB, Dr. Obinna Ezeobi. Among the topics discussed were requirements for the Nigerian Content Equipment Certificate and whether startup companies or research operators could access the US$400 million Nigerian Content Intervention Fund.
Speaking on NCEC requirements, the Director of Capacity Building at the NCDMB, Engr. Abayomi Bamidele, explained that the Board has developed “Guidance Notes,” outlining both mandatory and specific documents needed by applicants. He advised companies seeking certification to apply only in one or two categories in which they own relevant assets instead of attempting to register across all eight categories available. He also hinted that a platform would soon be opened by the NCDMB for lodging complaints related to NCEC.
On the Nigerian Content Intervention Fund, the Director of Finance and Personnel at the NCDMB, Mr. Uchendu Ossaowa, explained that research and development organisations cannot borrow from the Fund because it is reserved for contributors and companies already engaged in running oil and gas contracts.
However, the Director of Corporate Services, Dr. Abdulmalik Halilu, clarified that companies involved in research and development can access a separate US$50 million Nigerian Content Research and Development Fund established by the Board. He added that the NCDMB also sponsors hackathons, where innovation-driven firms can receive support through competitions designed to encourage local solutions.
The 14th Practical Nigerian Content Conference and Exhibition ended on Thursday with delegates visiting an oil and gas facility specialising in electrical services and related solutions.
