Operating costs not too high

Doha, Qatar — Anglo Dutch Shell
said operating costs are not as high
as being touted, but rather tied to
prevailing circumstances.
The Country Chair, Shell Companies
in Nigeria, Mr. Mutiu Sunmonu, who
spoke, yesterday, on the sidelines of
the ongoing World Petroleum

Congress, WPC, in Doha, Qatar, also
put part of the blame of high costs
on rising oil prices and contractors’
fees.
According to him, “you can’t have
very low costs with the current oil
prices at the international markets.
Also, when contractors charge you
for services, they charge you based
on the oil prices as they too want to
benefit from it.”
The Federal Government of Nigeria
has often complained of escalating
operating costs and charged the
National Petroleum Investment
Management Services, NAPIMS, the
investment arm of the Nigerian
National Petroleum Corporation,
NNPC, to scrutinise oil companies’
budgets diligently before approving
their projects.
Costs impact negatively on
government’s take from oil
revenues, as companies recover 100
per cent of their costs before
revenues are shared.
Revenue watch groups often cricitise
that since the oil companies are
usually the operators of the projects,
it is very difficult to monitor costs,
thereby denying government
additional revenues from oil
projects.
With regard to Nigeria, which runs a
mono oil economy, government’s
take from the revenues are not
usually as high as one would expect
for the benefit of Nigerians.
However, Sunmonu argued: “Part of
our social responsibility is to ensure
that government’s take from oil
revenues are very high, but in a
situation where we cannot dictate to
the contractors, there is hardly
anything one can do.”
Besides, he noted: “Our costs are
really not as high as feared. For the
Shell Joint Venture, our cost is below
$10 per barrel.”
: it is in fact about $7 per barrel,
which is among the cheapest you
can find.”
With regard to the high cost of Shell
assets, which are currently being
disposed under the portfolio
management and divestment
programme, the Shell boss insisted
that his company did not place any
price tag on the assets.
He said: “What we have done in all
of the seven oil blocks we have
divested from is to simply put them
on the table, the bidders then decide
the price at which they want to take
it. There was never a time we said
this is how much we want to sell a
particular oil block.”
He equally denied that bidders were
promised the right for operatorship
as part of the reason for the high
asset costs, saying: “If we had
promised any company operatorship
for any of the blocks, by now,
companies would have taken us to
court. We have challenged bidders
to produce proof of promise of
operatorship.”
Meanwhile, the President, World
Petroleum Council, WPC, Mr. Randy
Gossen, has charged oil companies to
deliver energy in a more renewable
and socially responsible manner.
The WPC boss who spoke at the
opening of the 20th WPC on Sunday
night, noted that although the
petroleum environment had become
more challenging, it equally offered
greater opportunities.
As such, he urged industry operators
to “make renewed efforts to find,
develop and deliver energy in a
more renewable manner that is also
socially responsible.”
He, however, admitted that
overcoming current challenges
called for “cooperation, innovation
and greater investments, as energy
solution will be based on these key
drivers.”
The Qatari Energy Minister, Al Sada,
thanked member countries for their
support for his country to host the
Congress, as this has made history
for the Middle East.
“It has taken 74 years for the largest
petroleum congress in the world to
come to the largest oil and gas
producing region in the world – the
Middle East.”