Nigeria’s crude oil production cost surges to $40/barrel – Report
Nigeria’s cost of crude oil production has surged to approximately $40 per barrel, according to a report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
This figure is significantly higher—nearly 300% more—than Saudi Arabia’s production cost, which stands at just $10 per barrel.
The NUPRC highlighted that rising production expenses, combined with unpredictable global oil prices, have made it increasingly challenging for Nigeria to compete effectively in the international market.
“With production costs ranging between $25 and $40 per barrel, Nigeria ranks among the highest-cost oil-producing nations. In contrast, countries like Saudi Arabia operate with far lower expenses, benefitting from more efficient production methods,” the commission stated.
Impact on Investment and Global Competitiveness
The regulatory body expressed concern that these high costs could deter investors, as profitability becomes more uncertain, particularly when global oil prices fluctuate. If crude oil sells at an average of $75 per barrel, over half of that amount is already spent on production, reducing potential earnings for producers.
Nigeria has long recognized the key factors driving its high production costs, including outdated infrastructure. Aging facilities, pipelines, and storage systems require frequent maintenance, increasing operational inefficiencies. The NUPRC stressed the urgent need to modernize infrastructure to cut repair expenses, extend asset lifespans, and boost productivity.
Additionally, issues like oil theft and pipeline vandalism have further exacerbated costs. The regulator acknowledged the government’s commitment to tackling these challenges, citing the 2021 Petroleum Industry Act as a critical step in improving sector efficiency.
Efforts to Reduce Costs and Improve Efficiency
The NUPRC disclosed ongoing efforts to lower production costs to at least $20 per barrel.
“Since assuming its role as the key regulator in the upstream sector, the NUPRC has actively worked to address these challenges. In 2023, it introduced a 10-year roadmap aimed at revitalizing Nigeria’s oil industry. In 2024, as part of a short-term initiative within this broader strategy, the commission rolled out its Regulatory Action Plan, with a primary objective of reducing production costs to $20 per barrel,” the report noted.
The commission warned that failure to control production costs could hinder investment, limit profitability, and weaken Nigeria’s resilience to global market shifts. Given that oil accounts for approximately 90% of the country’s export revenue and a significant share of government income, excessive production costs pose risks to Nigeria’s economic stability and growth.
Strategic Benefits of Lowering Production Costs
Reducing production costs would make Nigeria’s oil sector more attractive to both foreign and domestic investors, allowing the country to compete more effectively with other major oil producers. Lower costs would also enable oil companies to maintain profitability even during periods of declining global oil prices.
“Enhanced profitability would benefit both operators and the industry, potentially leading to increased tax revenues and royalty payments. This, in turn, could boost Nigeria’s foreign exchange reserves and strengthen its position in the global oil market,” the NUPRC concluded.
While achieving these cost reductions will be challenging, the commission emphasized that the long-term benefits—including improved investment inflows, market stability, and economic growth—are too significant to ignore.
