Nigeria Needs Oil above $40 for Offshore Fields

Global oil prices need to stay above $40 a barrel to keep deep offshore oil production and exploration economically viable in Nigeria, the Managing Director of the Nigerian National Petroleum Corporation has said.

Oil’s sharp drop in the last six months and the global credit crunch have raised concerns that many offshore projects may be delayed or cancelled in the world’s eighth largest oil producer.

“Deepwater developments in the region, particularly in the ultra-deep, require a sustainable crude price in excess of $40/bbl to support continued production, exploration and development,” Mohammed Sanusi Barkindo, head of the NNPC, said at an offshore oil and gas conference.

Oil prices have tumbled from a peak of around $147 a barrel last July to $44 on last Tuesday.

At the same time, costs of construction, labour and security, have risen significantly in the last few years for domestic and international oil companies operating in Nigeria like Royal Dutch Shell and Exxon Mobil.

“Given the uncertainty in crude prices in the long run, the industry needs to examine ways of achieving a steep reduction in costs,” Barkindo said.

Nearly all of Nigeria’s oil production growth is expected to come from offshore, which already represents 40 per cent of current output of less than two million barrels per day.

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