Donald Duke: Nigeria's Oil Security Costs Higher Than Production

The presidential candidate for the People’s Redemption Party, Donald Duke, has stated that Nigeria spends more money on securing its crude oil than on producing it. He believes that high security costs and poor infrastructure have raised production costs, which has pushed petrol prices up.

Duke made these comments during an interview with ARISE NEWS on Thursday. He argued that cutting down the cost of producing and refining crude oil could help bring down petrol prices and make life easier for Nigerians.

“The actual production cost of a crude in Nigeria is anywhere between $12 and $15. What takes it up to $25 or $45 is security costs and dilapidated infrastructure. So you’re paying more for security than producing the oil, and even the NNPC says that they’re trying to bring it down to $20 a barrel. So in other words, the oil producing companies have added the security. You can’t tell me that you pay about $10 or $15 to secure one barrel that is produced actually between $12 and $15,” he said.

The former governor of Cross River State said the government should focus on helping Nigerians be more productive by fixing the issues that drive up the cost of essential goods and services.

“I think the fundamental objective of government is the productivity of its citizens. So you’ve got to tackle all the things that are inimical to the productivity of your citizens,” Duke said.

He pointed out that energy is a major factor in economic productivity. He questioned why Nigerians still pay high prices for petrol when the country has so much crude oil.

“Now, energy is a kernel of it. Energy, capital, those things are very important. You’re an oil producing country. Supposedly you produce 1.7, 1.8 million barrels a day,” he said.

Duke clarifies ₦300 petrol proposal

Duke also explained that his plan was to lower the price of petrol to ₦300 per litre, not ₦200. He believes that revenue from other petroleum products could help to bring the price down.

“The point is, the margins that you make from other products, you can even use it and further dampen the price,” he said.

He laid out the costs that should be looked at when setting the price of refined petroleum products.

“Transportation takes it to $38. The refining costs about $10 a barrel. So that gives you $48,” he said.

Duke also mentioned that extra revenue from petroleum by-products could help support his argument for lowering petrol prices. He admitted that the ₦300 per litre price might not be possible because of existing crude oil deals made by the government.

“The 300 figure is not tenable because the APC government, right, did a forward sale that didn’t make sense. But the reality is that you now have to blend. And if you blend it to say 700, 700 is still far better than 1,300,” he said.

He suggested that the government should look for domestic crude oil and buy extra supplies from producers in Nigeria to cut transportation costs.

“If you don’t have the Nigerian crude, which is the fault of the same government, it’s APC. I’m coming, I’m coming. If you don’t have that crude, then you now go into the blended. What do you have and what can you buy? And try and buy it from the producers in Nigeria if they will allow you. So that at least you gain on freight,” Duke said.

He also proposed a contract-refining plan where the government would provide crude oil to a refinery, pay a set processing fee, and keep the refined products.

“Now, you contract refine. Recall, several years back, we used to swap crude for products, right? So it’s literally the same thing. You swap this, and I gave you my breakdown that it’s $10 maximum. I’m using the maximum here, $10 per barrel for refining.

“So it’s not, and it’s your crude. So you’re giving the refinery and saying, look, we agree on a price. I pay you that price. The product is mine. I know the by-products and how I distribute it, how I sell it, you know, it is left to me,” he said.

Duke insisted that the government could still lower petrol prices significantly even if the ₦300 target was not realistic.

“If you take what you have and buy it back from your JV, JV partners and blend and put it together and blend the prices, the average, it will not be 300. It will be far less than what you’re paying today,” he said.

When asked if ₦700 or ₦800 per litre would be a better target, Duke responded, “Benchmark. Yes. If you’re not, if the crude is not yours.”

Duke proposes fuel dyeing to curb smuggling

Duke dismissed the idea that lowering petrol prices would automatically lead to more smuggling into other countries.

“Are you going to punish your citizens for your inability to map your borders? Let me give you another solution. You see, as a government, you must constantly think of solutions to problems,” he said.

He suggested that the government could dye fuel to help track petroleum products that might be smuggled across Nigeria’s borders.

“You can dye your fuel. You can dye your fuel black if you wanted to. It doesn’t affect its application. And if you dye it black and you see black fuel or green fuel around your neighbouring countries, you have NIA. They go there in cooperation with the nation’s security agencies and find out how that black fuel, which is unique to Nigeria, got there,” Duke said.