Nigeria’s functional oil rigs rise from 12 to 32 but operators cry out over 40% cost cut

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By Fortune Okorie

Nigeria had 50 rigs pumping oil to the international market but this came down to 12 in the slump of prices few years ago. Now, insiders say this has risen to 32 due to recovery of oil economy.

The critical problem however is that rig operators serving the Nigerian oil industry want the Federal Government through the Nigerian National Petroleum Corporation (NNPC) which had slammed a 40 per cent cost cut when oil went down to $40 per barrel to move up the cut limit now that oil is doing 100 per cent of that.

The call was made in Port Harcourt, Rivers State, at the 2018 general meeting between the Department of Petroleum Resources (DPR) and rig owners/operators at Jevnik Place on Tombia Street in the GRA II section.

The call came from Ote Enaike, chairman, International Association of Drilling Contractors (IADC), who said the FG through the NNPC slammed the cut on oil corporations who passed same to drillers.

The order was for operators to cut down expenses by 40 per cent when oil prices came down as low as $40 per barrel. During this period, he said, it was difficult for drillers as they had to reduce workers and still maintained oil industry standards in terms of rig efficiency.

He said the over 30 drillers in Nigeria and several drilling operators were surprised that despite the increase of oil prices to about $80 per barrel, no order has come to raise the spending limits.

The danger, he said, is that the drillers are struggling to up their game with the old spending. He said it makes it difficult to get quality personnel and to upgrade equipment.

According to him, it is also difficult to convince those laid off to return to an industry that caused them pains. To recruit new workers has been tough due to the cost of training them to required standards.

So far, the number of rigs in Nigeria which fell to as low as 12 in 2016 when oil prices fell badly has surged to 32, the 2015 level. He said the number fell from 50 at the rosy levels.

The early upward review of the operating costs, he said, was important to give cost flexibility to the drilling sector of the oil industry and allow the drillers meet the demands of the industry instead of being forced to operate with an obsolete budget. “When oil prices fell, the cost of equipment from manufacturers did not drop. We were forced to spend high to produce low outputs. This is the time to raise the ceiling”, he stated.

Sources at the annual conference observed that the slow nature of the regulatory agencies staffed by people without industry sharpness and knowledge has been the bane of Nigeria’s oil and gas industry.

Welcoming the guests, the chairman of the organizing committee, Joseph Cookey of DPR, was crucial for the purpose of assessing issues and challenges as well as opportunities in the sector.

The Port Harcourt zonal operations controller of DPR, Frank Briggs, in his address, said 2018 has been full of challenges but that the biggest break in the year remains Total’s Egina FPSO and the increase in oil prices.