Cost of Services in Nigeria’s Oil & Gas Sector Is the Cheapest in Africa — PETAN President

The President of the Petroleum Technology Association of Nigeria (PETAN), Engr. Wole Ogunsanya, has stated that the cost of providing services in Nigeria’s oil and gas sector remains the lowest in Africa, despite widespread misconceptions about production expenses in the country.

He made this known during a Townhall Session at the 14th Practical Nigerian Content (PNC) Conference and Exhibition held at the Nigerian Content Tower (NCT), Yenagoa.

Nigeria’s CAPEX Is the Lowest in Africa

Ogunsanya explained that it is important to distinguish between Capital Expenditure (CAPEX) and Operating Expenditure (OPEX) when assessing the cost of oil and gas operations.

According to him, while some industry observers describe Nigeria as “uncompetitive,” the actual CAPEX data shows that Nigeria has some of the cheapest project execution rates on the continent.

He attributed the perception of high costs largely to challenges around pipeline evacuation, security, and the presence of portfolio companies that distort pricing structures.

Evacuation and Security: Top Cost Drivers

Highlighting Nigeria’s biggest cost driver, the PETAN President said:

“The number one cost driver in Nigeria’s oil and gas industry operations is evacuation of crude oil and gas.”

Due to persistent pipeline vandalism, some companies now rely on vessels and barges to transport crude—at an additional US$12 per barrel.
Costs also include payments to armed escorts and security agents.

Nigeria Cheaper Than Global Peers

Ogunsanya revealed that many technical services in Nigeria cost far less than in other regions.

For example:

• Land rig contracting in India: up to US$60,000 per day

• Same service in Nigeria: as low as US$30,000 per day

He noted that Nigeria’s strong local content policy plays a major role in keeping industry prices relatively low.

Portfolio Companies Still Inflating Costs

Ogunsanya expressed concern about the role of portfolio companies—firms without the required assets or technical capacity that still secure contracts.

He said some of these firms had previously obtained the Nigerian Content Equipment Certificate (NCEC) and were able to bid on NIPEX, thereby driving up project costs without adding value.

The Presidential Directive on Local Content Compliance (issued March 24, 2024) now mandates that such companies be barred from participating in the industry unless they possess verifiable operational capacity.

PETAN Seeks Greater Technical Input in Cost Benchmarking

Ogunsanya urged the Nigerian Content Development and Monitoring Board (NCDMB), the Federal Government, and NNPC Ltd to work with PETAN in benchmarking project costs across global markets.

This, he said, will enable the Association to advise regulators more accurately:

“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 on NCEC, Intervention Funds, and R&D Support

The session, moderated by Dr. Obinna Ezeobi, General Manager, Corporate Communications Division (CCD) of NCDMB, also covered several important topics:

1. NCEC Requirements

Engr. Abayomi Bamidele, Director of Capacity Building at NCDMB, announced that the Board has released Guidance Notes to help companies understand mandatory documents and category-specific requirements.

He advised applicants to register only in categories where they possess real assets, rather than selecting all eight NCEC options.

2. Support for R&D and Startups

Mr. Uchendu Ossaowa, Director of Finance and Personnel, clarified that the US$400 million Nigerian Content Intervention Fund (NCI Fund) cannot be accessed by startups or R&D companies, as the facility is strictly for contributors with running contracts.

However, Dr. Abdulmalik Halilu, Director, Corporate Services, noted that R&D firms can access the US$50 million Nigerian Content Research and Development Fund, and can also benefit from NCDMB-sponsored hackathons and innovation challenges.

Conference Wrap-Up

The 14th edition of the Practical Nigerian Content Conference and Exhibition concluded on Thursday with a site visit by delegates to an oil and gas facility specializing in electrical services and related technical solutions.