The cost of providing services in Nigeria’s oil and gas industry remains the lowest on the African continent, despite persistent concerns about production expenses, according to the President of the Petroleum Technology Association of Nigeria, Engr. Wole Ogunsanya.

Ogunsanya made this assertion on Wednesday during a Town Hall session at the 14th Practical Nigerian Content Conference and Exhibition held at the Nigerian Content Tower in Yenagoa. He told participants that comparative analysis conducted across African oil-producing nations shows Nigeria’s capital expenditure levels remain highly competitive, even though operating issues continue to affect overall project delivery costs.

He explained that a clear distinction must be made between capital expenditure and operating expenditure when assessing cost competitiveness. According to him, while Nigeria’s capital expenditure rates are arguably the lowest in Africa, misconceptions around the country’s high cost environment stem largely from operational challenges rather than equipment or service pricing.

He attributed these perceptions to issues such as evacuation difficulties, security expenses, and the practices of portfolio companies that manipulate contract pricing without owning operational assets.

PETAN, which serves as the umbrella body for indigenous technical oilfield service companies, has been tracking production costs in several countries using both capital and operating expenditure benchmarks. In Nigeria, the association has examined cost elements at different stages of production to understand where financial pressures emerge most significantly.

In his words, “The number one cost driver in Nigeria’s oil and gas industry operations is the 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.” He also explained that security payments to guards and escorts add to operational expenses that are often mistaken for excessive service costs.

Ogunsanya, who also serves as Chairman and Chief Executive Officer of Geoplex Drillteq Limited, compared land rig contracts across markets to demonstrate Nigeria’s relative cost advantage. He said securing a land rig in India can cost as much as US$60,000 per day, while the same service in Nigeria can go for as low as US$30,000 per day for an equivalent period. He noted that one of the reasons for this disparity is the impact of Nigeria’s local content policies on pricing structures within the industry.

According to him, “Local content policy and practice in the industry here subsidises oil and gas production in ways that might not be very apparent to some analysts.”

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However, he raised concerns about the influence of certain portfolio companies that operate without owning assets or possessing technical capacity. He revealed that PETAN is “aware of portfolio companies that had previously obtained the Nigerian Content Equipment Certificate, became registered on the Nigerian Petroleum Exchange and had services and projects awarded to them.”

He referenced the Presidential Directive on Local Content Compliance Requirements issued on March 24, 2024, which bars such companies from participating in oil and gas contracts unless they can demonstrate tangible capacity to execute projects independently.

Ogunsanya further called on the Nigerian Content Development and Monitoring Board to engage PETAN specialists for guidance on equipment requirements across different operational segments of the industry. He also urged the Federal Government and the Nigerian National Petroleum Company Limited to support efforts by the association to establish benchmark project costs across other oil and gas markets.

This, he said, would enable PETAN to provide informed guidance to authorities when large project proposals are presented. According to him, “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.”

Discussions at the Townhall Session also addressed the Nigerian Content Equipment Certificate requirements and funding access under the Nigerian Content Intervention Fund. The session was moderated by the General Manager of the Corporate Communications Division of the NCDMB, Dr Obinna Ezeobi.

On certification, the Director of Capacity Building at the NCDMB, Engr. Abayomi Bamidele disclosed that the Board has developed “Guidance Notes” outlining mandatory documentation and other category-specific requirements for applicants seeking the NCEC. He advised companies to apply only under one or two categories where they have actual operational assets rather than attempting to register across all eight available classifications. Bamidele and Ezeobi also assured participants that a dedicated complaints platform would be launched by the NCDMB for issues relating to the certification process.

On financing, the Director of Finance and Personnel at the NCDMB, Mr Uchendu Ossaowa, clarified that companies engaged solely in research and development are not eligible to access loans under the Nigerian Content Intervention Fund. He explained that the funding scheme is reserved for contributors to the fund and firms with active oil and gas service contracts.

However, the Director of Corporate Services at the NCDMB, Dr Abdulmalik Halilu, noted that research-driven companies can benefit from the US$50 million Nigerian Content Research and Development Fund established by the Board. He also highlighted ongoing hackathons sponsored by the NCDMB as part of its innovation support initiatives for R and D focused enterprises.

The 14th Practical Nigerian Content Conference and Exhibition concluded on Thursday with delegates embarking on a site visit to an oil and gas facility specialising in electrical services and related solutions.

Meiza Nigeria