ABUJA, Jan 27 (Reuters) – 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 on Tuesday.
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 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 Tuesday.
At the same time, costs for 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 (RDSa.L) and Exxon Mobil (XOM.N).
“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 percent of current output of less than 2 million barrels per day. (For full Reuters Africa coverage and to have your say on the top issues, visit: africa.reuters.com/ ) (Reporting by Randy Fabi; Editing by Nick Tattersall)