Global oil prices need to stay above $40 a barrel to keep deep offshore oil production and exploration economically viable in Nigeria, the head of the country's state-run oil firm 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 exporter.
“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 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 Tuesday.
At the same time, costs for construction, labor 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% of current output.
Nigeria's crude oil exports are expected to average around 1.7 million bpd in March, down from 1.88 million in December, due to OPEC quota cuts and outages.
About $33 billion has been spent on developing offshore oilfields since Africa's biggest oil producer opened up its waters to oil companies more than 15 years ago.
An additional $12 billion is expected to be invested in the next few years to develop Shell's Bonga SW and NW oilfields, Total's Usan and Exxon's Bosi.
That should help boost deepwater production capacity to around 1.3 million bpd, according to the NNPC.
But deciding whether to invest further in Nigeria's offshore oilfields has become more difficult as the size of oil discoveries become smaller, Barkindo said.
The amount of oil reserves found in the average offshore well was estimated at around 20 million barrels of oil equivalent in 2006, down from a peak of 65 million in the late 1990s. (Reuters)