High cost of production to affect Nigeria’s, others’ oil output


Nigeria and other countries in sub-Saharan Africa may continue to suffer high production cost and reduced output as global oil and gas stakeholders strive to reduce the cost of production per barrel of crude oil, The Nation reports.


According to Sebastian Spio-Garbrah, Chief Africa Frontier Markets Analyst, DaMina Advisors LLP, Ontario, Canada, the high cost of production is due to the high cost of fund as the United States (US) interest rates continue to increase. Spio-Garbrah stated that the US used to have the lowest interest rates, but the interest rates have continued to soar and because cost of fund is a major component in oil operations, countries that do not have access to funds with low interest rates such as Nigeria, may have to contend with high production costs.


He also listed some other factors affecting Nigeria and other African countries production targets to include the Paris climate change accord & effects, Saudi-Russia détente on oil production, rise in US and non-US Shale oil exports, domestic demands for stronger local content laws and rising regulatory risks in the mining sector. He advised that oil exporters should build more local refineries to develop domestic petrochemical capacities and that they should also stabilise their macro-economic environments to make the investment climate more attractive by reducing the domestic interest rate to spur local borrowing.


Source: Energy Mix report

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