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Since the beginning of this year, the Federal Government has been battling with fuel scarcity and the incessant plundering of Nigeria’s crude oil by vandals, Okechukwu Nnodim writes
Crude oil theft, pipeline vandalism and the persistent scarcity of Premium Motor Spirit, popularly called petrol, are the major challenges that characterised Nigeria’s oil and gas sector in 2022.
Although there had been some positive outcomes in terms of crude oil output from Nigeria in the last two months, the country’s oil production suffered a severe crash between January and September this year due to massive oil theft in the Niger Delta region.
In fact, oil production crashed to as low as 937,766 barrels per day in September, the lowest output in several years. The country consistently missed the 1.8 million barrels per day monthly oil production quota approved by the Organisation of Petroleum Exporting Countries.
Nigeria is a long-standing member of OPEC and the country’s low oil production kept denying it millions of dollars monthly. This was despite the hike in global crude oil prices, following the military invasion of Ukraine by Russia in February.
Data sourced from the Nigerian Upstream Petroleum Regulatory Commission showed the repeated monthly decline in crude oil production between January and September.
Nigeria pumped 1.39 million barrels per day in January 2022, but this dropped to 1.26mbpd in February, and further reduced to 1.24mbpd in March.
The country’s oil production continued its southward dip in April, dropping to 1.22mbpd. It crashed further to 1.02mbpd in May, before moving up marginally to 1.16mbpd in June.
But the marginal increase in June was not sustained, as oil output dropped to 1.08mbpd in July, it crashed further to 0.97mbpd in August, and eventually plunged to its all-time lowest of about 0.94mbpd in September.
However, the nation’s oil output picked up marginally to 1.01mbpd in October. The increase was sustained in November, as crude oil production rose to 1.18mbpd last month.
The two consecutive increase in oil production was occasioned by the enhanced interventions by law enforcement agencies and the deployment of a private pipelines surveillance firm by the Nigerian National Petroleum Company Limited.
“Our security agencies should pay great attention to the country’s oil production,” the President, Petroleum Retail Outlet Owners Association of Nigeria, Billy Gillis-Harry, stated in his reaction to the development.
He told our correspondent that pipelines were national assets, adding that “our economy depends on the production of crude oil, regardless of what anybody is saying with respect to earnings from solid minerals, agriculture and other sectors.”
Gillis-Harry noted that “the size of dependence of our daily economic activities is almost equal to the petro-dollars which are produced from the Niger Delta.”
$1.9bn monthly oil losses
In a television interview early this month, the Chief Upstream Investment Officer, NNPC Upstream Management Services, Bala Wunti, said Nigeria was losing an estimated 700,000 barrels of crude oil daily, before the recent recovery began about two months ago.
He said, “From our records, before we recovered, we were losing 700,000bpd translating to 21 million barrels per month, and if you consider an average price (of crude oil) this year at $90/barrel, that will translate to somewhere around $1.8bn or $1.9bn losses that we suffered.”
He explained that oil theft due to vandalism stalled production and the delivery of crude oil from many terminals in the Niger Delta region.
“I think the key question to ask is where were Forcados, Brass Terminal, and where was Bonny in the Force Majeure? The reason is simply that we were unable to deliver crude to those terminals,” Wunti stated.
He added, “And why were we not able to deliver crude to those terminals? It is simply because of the security vulnerability. As I speak to you, Brass is in Force Majeure, Bonny is in Force Majeure. That is about 300,000 barrels deferred already.
“We have been working hard with the private security contractor to return the Trans-Niger Pipeline, we have succeeded to some extent but not where we want to be. We are hoping we will open Bonny very soon.
“The security situation is now restored together with certain activities that have been carried out to revamp what we see in Forcados. Forcados is back producing, Bonny will soon be back.
“Yes, indeed we are back, but up till today, one of our major trunk lines we can’t use because of security. Trans Forcados is back, Trans Escrarvos is back, Trans Remos is back. Even as I speak to you today, we are still having some of those volumes.”
Double revenue loss
Commenting on the performance of the sector in 2022, an industry expert and National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, said Nigeria was bleeding from double oil industry losses.
He said the first industry loss was caused by the massive oil theft in the Niger Delta, while the second had to do with the humongous spending on PMS subsidy by the Federal Government through NNPC.
He told our correspondent that these challenges had marred the progress that should have been made in the sector this year, stressing that it had been very tough for the NNPC to deliver efficiently because of these concerns.
“You can’t be losing millions of dollars to oil theft and at the same time be spending billions of naira as subsidy on petrol and not feel the pain. The country is bleeding from double losses as far as the oil sector is concerned,” Ukadike stated.
He added, “That is why it is important for NNPC to boost its security of crude oil pipelines, and work with security agencies to protect these assets. However, I’m aware that they’ve also contracted a private firm to support in pipeline surveillance.”
Private pipelines surveillance
Around the first quarter of this year, the NNPC contracted the services of a private pipelines surveillance firm to further protect the country’s oil assets.
The firm, Tantita Security Services Nigeria Limited, is led by Government Ekpemupolo, popularly known as Tompolo.
In his address at the Legislative Transparency and Accountability summit in Abuja last month, the Group Chief Executive Officer, NNPC, Mele Kyari, confirmed and justified the decision of the oil company to engage the oil pipeline surveillance team.
Kyari explained that the move was aimed at curtailing the massive theft of oil in Nigeria.
“The scale of oil theft that we have seen was not anticipated, not expected, not thought of. The scale is enormous. We have seen pipelines taken from our main trunk-lines into abandoned platforms in which people come to steal oil,” Kyari had stated.
He added, “We have seen the thousands of illegal refineries that we have taken down in the last four, five months. We have seen up to 295 illegal connections to our pipelines and many of them have been there for years. Companies would stop injecting oil if they discover it can’t get to the terminals.”
Industry operators and experts stated that the pipelines surveillance contract was currently paying off, going by the consecutive monthly rise in oil production in the last two months.
Fuel scarcity problem
Aside from oil theft, the Nigerian oil sector has also recorded repeated fuel scarcity since the beginning of this year.
Currently, many states in Nigeria are still facing a short supply of PMS, though oil marketers and the NNPC are making efforts to address this.
The Federal Government, through NNPC, has been the sole importer of petrol for several years, as other oil marketers stopped importing the commodity due to the difficulty in accessing the United States dollar.
NNPC, being the only PMS importer, has also been subsidising the product. It spends billions of naira daily as subsidy on petrol.
The PUNCH had exclusively reported in October that the the regime of the President, Major General Muhammadu Buhari (retd.), could spend not less than N10.976tn as subsidy on petrol, from when it came to power in 2015 till May 2023.
The report stated that already (as at October), the government had spent about N6.88tn in subsidising the commodity, according to data obtained from NNPC and the Nigeria Extractive Industries Transparency Initiative.
The President and his party, the All Progressives Congress while campaigning in 2015, kicked against the fuel subsidy scheme that was implemented by the previous administration of the Peoples Democratic Party.
Oil marketers stated that the burden of fuel subsidy on NNPC, coupled with other challenges in the downstream oil sector, had contributed in making PMS less readily available, causing repeated scarcity since the beginning of this year.
At the recent legislative summit in Abuja, the NNPC boss also explained how PMS smuggling was being fueled by the huge subsidy on petrol in Nigeria.
Kyari had said, “Today when PMS comes into this country, you transfer to the marketers at N113 for us to realise N165 at the pump. This is the reality. That means whatever is the cost, anything outside that value is subsidy.
“So somebody has to pay for it. There is nowhere today you can land a litre to the pumps, even at the N419 exchange rate, for about N400/litre. It is not possible. So every difference between N113 and that value is subsidy.
“That means in some instance, we have been subsidising by up to N290/litre. And in this regime it is impossible for you to avoid all the wrong things that are happening -round tripping, cross border smuggling, and documents forgery.
“Anywhere you have arbitrage you have this issue. So for as long as arbitrage is there you would continue to have these challenges.”
Also, the Group General Manager, Group Public Affairs Division, NNPC, Garba-Deen Muhammad, told our correspondent that the oil company was shouldering a lot of burden to ensure the supply of PMS, despite the scarcity witnessed this year.
“Imagine what will happen if NNPC stops PMS imports. By law, NNPC is meant to ensure energy security in Nigeria and this has been at a very huge cost for the company,” he stated.
Refineries, deregulation as solutions
Officials of IPMAN, PETROAN, as well as the Major Oil Marketers Association of Nigeria, stated that the key solution to the fuel crisis in Nigeria was for the country to stop subsidy and fully deregulate the downstream oil sector.
They also noted that it had become vital to get Nigeria’s refineries working, so as to reduce the country’s dependence on imports.
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