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By Adewale Sanyaolu
Despite producing over half of Nigeria’s crude, local operators are currently facing cost pressures that could stall investment and growth, the Indigenous Petroleum Producers Group(IPPG), has warned.
Speaking at the Nigerian International Energy Summit (NIES) which ended in Abuja, last week, Chairman of IPPG, Mr. Adegbite Falade, cautioned that Nigeria’s oil and gas operating costs remain about 40 per cent higher than those of comparable non-shale jurisdictions, placing local producers at a structural disadvantage. He warned that in a global environment of tightening capital and growing investor discipline, Nigeria risks pricing itself out of upstream investment if costs are not urgently addressed.
“Average liquids production rose to 1.64 million barrels per day (bpd) in 2025, up from 1.56 million bpd in 2024 and peaking at 1.77 million bpd during the year. Much of the improvement followed major upstream asset transfers from international oil companies to local operators, alongside better pipeline availability and reduced crude theft,”.
However, he said, beneath the production rebound lies a cost structure that industry players say is increasingly unsustainable.
He added that, indigenous producers—many of whom operate mature, onshore and shallow-water assets—the cost burden is particularly acute. “Multiple regulatory fees, overlapping approvals, security-related expenditures in the Niger Delta and limited access to long-term, affordable financing continue to inflate production costs, eroding margins even as output rises,”.
While recent petroleum sector reforms and government approvals for mergers and acquisitions have increased local ownership and strengthened operational control, Falade noted that cost inefficiencies could discourage further investment and delay field development, especially for marginal and brownfield assets.
He warned that the high-cost environment also threatens Nigeria’s ambition to attract new capital into its upstream sector at a time when investors are increasingly selective, prioritising low-cost, low-carbon jurisdictions.
He maintained that, without cost reforms, higher indigenous participation alone may not translate into sustained production growth or revenue stability.
Falade disclosed that progress in other segments of the industry offers some relief, but not a full solution.
“More than 16 companies have benefited from the Midstream and Downstream Gas Infrastructure Fund, supporting compressed natural gas (CNG), liquefied petroleum gas (LPG) and mini-LNG projects across the country. Critical gas infrastructure, including the Ajaokuta–Kaduna–Kano (AKK) and OB3 pipelines, is advancing, while the NLNG Train 7 project is about 80 per cent complete.
In the downstream sector, the ramp-up of operations at the 650,000 bpd Dangote Refinery is already reducing Nigeria’s dependence on imported fuels and easing pressure on foreign exchange.
Falade called for urgent action to streamline regulatory processes, eliminate duplicative charges, improve security in producing areas and fully implement the Petroleum Industry Act (PIA) to create a more competitive fiscal and operating environment.
According to him, Nigeria’s long-term success will depend not just on who controls production, but on how efficiently hydrocarbons are produced and converted into domestic value.
“As global energy markets evolve, the country faces a narrowing window to reposition its oil and gas sector, not merely as a high-output producer, but as a cost-efficient, value-driven energy economy capable of delivering growth, stability and shared prosperity.”
