About N1.0 trillion may have been lost to production shortfalls due to the resurgence of attacks on oil and gas facilities in the Niger Delta, between January and June 2016 as well as various facility related repairs and leakages.
In the first quarter, going by the figures of the Central Bank of Nigeria, CBN, at 1.82 million barrels per day, bpd, down from targeted 2.2 million bpd, the country recorded a total production shortfall of 380,000 barrels per day, bpd.
However, the shortfalls worsened in the second quarter as the Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Dr. Ibe kachikwu, stated that Nigeria’s crude oil output had dropped to 1.6 million bpd, giving a shortfall of 600,000 bpd.
Furthermore, recent data from the NNPC revealed that Nigeria had between January to April 2016, lost N51.388 billion to pipeline vandalism.
Giving a breakdown of the cost of the bombings to the Nigerian economy, the NNPC, in its Monthly Financial and Operations Report for April 2016, revealed that the country, spent N33.994 billion for pipeline repairs and management, while as a result of the vandalisation, N10.335 billion worth of crude oil was also lost, even as petroleum products losses between January and April 2016, stood at N7.059 billion.
The report further highlighted that crude oil losses for the four months period, accounted for 61.06 per cent of the total crude oil loss of N16.925 billion recorded in the 12-month period, between May 2015 and April 2016, while pipeline repairs and management cost for the four-month period accounted for 36.3 per cent of the total loss of N93.649 billion between May 2015 and April 2016.
On the other hand, product losses for the four months period were 18.03 per cent of the total of N39.145 billion recorded between May 2015 and April 2016.
The amount lost to pipeline vandalism in the four months period, between January and April 2016, was 16.38 per cent of the total sum of N313.652 billion remitted by the NNPC to the Federation Account Allocation Committee, FAAC, in the four months period.
In addition to these losses, NNPC disclosed that that its subsidiary, the Nigerian Petroleum Development Company’s, NPDC, crude oil sales was still hampered by the vandalism of the Forcados pipeline.
According to the NNPC, the vandalism had continued to deny NPDC of monthly crude oil revenue of about N20 billion.
To this end, from February 2016, when the Forcados pipeline was first vandalized, till date that it was yet to be repaired, the country has lost N100 billion.
Furthermore, the NNPC reported that the incessant pipeline vandalism posed the greatest threat to the power industry, noting that the country has lost over 1,500 megawatts of power supply to the damage as gas supply from Forcados, which is Nigeria’s major artery, accounts for 40-50 percent of gas production.
In addition to challenges in gas to power, vandalism had brought about a scarcity in Liquefied Petroleum Gas, LPG, also known as cooking gas and has negatively affected the performance of the country’s refineries.
Also, major refineries across the globe have concluded plans to stop the purchase of crude oil from Nigeria due to rising uncertainties about the country meeting up with deliveries. This is mainly due to the fact that a number of oil companies in Nigeria had declared force majeure of crude oil export, while a few others had been forced to suspend or cut production as a result of the bombing of oil facilities across the Niger Delta.
Specifically, data obtained from Reuters revealed that four of Nigeria’s oil grades – including the largest stream, Qua Iboe — had been under force majeure over the last two months — a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
The report further stated that refineries in the United States’ East Coast are starting to turn away from Nigerian crude oil, noting that these same refineries had been on a buying spree for Nigerian crude in recent months that averaged 240,000 barrels per day (bpd) in April and May.
As a result, the report said differentials to dated Brent for Qua Iboe, Bonny Light and other grades are under downward pressure, adding that there are several unsold cargoes for June loading.
According to the report, the reduced demand means Nigeria is not benefiting as much as others from a rebound in Brent crude prices, which is partly driven by its own oil outages, stating that the reluctance of the refineries to buy Nigeria’s crude oil was limiting the prices Nigeria can get for its oil even as there is less of it.
The NNPC explained that the reduced national production volume due to indiscriminate vandalism of oil and gas facilities and product theft by the vandals had continued to destroy value and put NNPC as well as the Federation at disadvantaged competitive position, stating that crude oil and products losses have continued to cost NNPC and the country huge amount of financial and human resources.
Industry analysts are putting the cumulative cost of these challenges since this year at over N1.0 trillion, as the entire economy which runs largely on the oil industry resources bleeds from the pressures.
According to the NNPC, reduction in vandalism will indeed unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, stable gas supply to power plants, improved refinery utilization due to increased crude oil feed from restored pipelines, and reduction of crude/product losses.
To address the issue, Minister of State for Petroleum Resources Kachikwu called on the militants to shelve their weapon and embrace dialogue with the Federal Government.
He said, “There is no doubt that over the decades of oil production, a lot of things that ought to have been done in the oil geographical areas were not done. The answer to the issue will not be heating up the grounds.”
He further stated that government was making contacts with everybody involved especially those that could be identified, while he expressed confidence that through dialogue, the crisis would be resolved.
He urged the militants to allow the truth reign and assured that federal government was ready to intensify effort to ensure development in the region.
Also speaking on the issue, National Executive Chairman, Host Communities of Nigeria, Producing Oil and Gas (HOSTCON), Mr. Mike Emuh, called on the Federal Government, the Niger Delta Avengers and other militant groups in the Niger Delta to immediately adhere to a one-month ceasefire to allow for dialogue among all stakeholders on ways to address the crisis in the region.
Emuh, in a presentation to Sweetcrude, also commended the Federal Government for all its current efforts aimed at achieving permanent peace in the region, while he urged citizens of the Niger Delta to tow the same line
To tackle the crisis, Emuh insisted that pipeline surveillance contracts should be awarded to oil producing and impacted communities all over the country, while he also advocated utilization of 100 per cent of the amnesty budget for the empowerment of former militants that had laid down their arms.
He further maintained that all international oil companies should be made to relocate their headquarters to their states of operations; reopening of the closed down Maritime University, Okerekoko within this period, to urge all to sheath their sword and give room for dialogue; while the Federal Government should pronounce immunity for the Niger Delta Avengers within this period.
Credit: All Africa