What it costs to produce oil

The collapse in the price of oil has squeezed energy companies and countries that were betting on higher returns. Here’s what it costs on average to pump a barrel of oil in the 20 biggest oil producing nations.

chosen04:
With respect to the recent Budget presentation by the Nigerian Junta Head, Gen. Mohammed Buhari for the 2016 fiscal year, the Coodinator of All Coordinators (COC) and the Spokesman of Indigenous People Of Biafra (IPOB), went on his facebook page to deconstruct Buhari's lies.

Excerpt: . . DECONSTRUCTING BUHARI'S 2016 BUDGET OF LIES & DECEIT----Part-1


QUESTIONS BY IPOB:

3) Can Buhari and his gangs explain what happened to the difference between the 2016 Gross earning and 2016 Expected revenue which stands at N5.2828 trillion? If N820 billion (13.44% of Gross earning) is the net, then is N5.2828 trillion (86.56% of Gross earning) the cost of production for the 803 million barrels?

IPOB is asking Buhari and his gangs!!! Source: www.thebiafratimes.co/2015/12/deconstructing-buharis-2016-budget-of.html

emmalexabl:
Thank God..,we go soon answer our papa names.
Biafrans.,
Oduduwarastans.,
Arewastans..
And so on...

tuale4u:


The IPOB guy did not understand the budget. let me help him explain.


[size=14pt]Why Oil revenue in 2016 budget is just 820 billion naira? An Explanation!![/size]

1. The Federal government budget is the Budget of the federal government alone. Not the Budget of the country.
Thus from the Nigeria sharing formula, the Federal government takes about 54% of the total oil revenue accruing to the country (Nigeria Federation).

2. Most of the oil production in Nigeria are JV and PSC. Using the JV template, Nigeria (the federation not Federal govt) only owns 60% of the oil produced and the Oil companies owns the remaining 40% of the oil produced per day .

thus the 2.2 million per day, only 0.6*2.2million=1.32million belong to Nigeria (The federation).

Federal govt share (Potential) = 0.54*1.32million=712,800 per day.

3. The actual average production per day is about 80% of the Potential production
this is because of 20% shutdown for maintenance, unplanned shut downs, pipeline vandalisation etc.

Thus the Federal govt actual average production per day = 0.8*712,800=570,240.

4. Today the average cost of production per barrel in Nigeria is about $18 per barrel.
Actually some onshore field cost are as low as $10 per barrel while some deep offshore and shallow offshore cost are as high as $25 dollar per barrel. Today more than 60% of Nigeria crude are from Offshore. thus using an average cost of $18 per barrel is realistic considering also "carry agreement" (to be explain in the last paragraph) which Nigeria have with oil company.

According to CNN the operational cost of one barrel of oil in Nigeria is $15 while the capital cost is $16 making a total cost of $31.
While operational cost is daily cost, Capital cost is not. Capital cost are usually recovered within 2 to 3 years. However since capital investments are mostly in form of carry agreement, giving it a 20% cost of capital cost ($3) is reasonable. Thus we can use daily cost of ($15+$3=$18)

Thus out of the $38 dollar per barrel price of oil, the net revenue to the govt is about $20 per barrel. (Selling price ($38) minus Cost price ($18) = $20)

thus the expected revenue to federal government from direct sales of Crude oil in 2016 is:

= $20 *199naira/1$ *570240*366*billion/1000000000= 830billion naira


From my estimation the Federal government expected revenue from direct oil sales is about 830billion naira which is very close to 820 billion naira estimated from federal government.


However, this is not all the federal govt get from having oil in this country. The oil companies pay company tax in hunderds of billion of naira.
But the govt choose to call it company tax because other companies that are not oil companies pay tax too. However the company Tax of oil companies is about 85% of their profit. Thus of the about 1.5 trillion naira expected revenue from Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, about 50% of it are coming from oil companies.


Also another reason the govt is not getting much more currently from Direct oil sales is because of "Carry agreement"
Most of the recent oil development and investment in the last ten years on JV contract are mostly done on "Carry agreement".

Carry agreement is the contract between the govt through NNPC and Oil companies whereby the Oil companies provide all the fund to invest in new field development (Instead of NNPC providing 60% of the cost), and then the companies recover their money by collecting part of the federal govt oil share over time. That means some of the oil that would have got to the Federal govt today have been collected by the federal govt ahead of time in the past. So they get less today.

AndroBlaze:


Oga are you Kachikwu!!!

Kai, I have never seen such an in-depth explanation- enough tuales for your sir !

Igwe9:
Hmm, would have to go through this again to understand it better.