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Why oil firms are divesting, by stakeholders

BY MICHAEL EBOH

Stakeholders have blamed the ongoing divestment recorded in the oil and gas sector on high operating costs and tough operating environment.

Chief among this is the menace of crude oil theft which has reached an alarming level over the years.

According to oil and gas experts, Nigeria suffers from widespread oil theft and difficult relationships, in most cases, with local communities, driving up the costs of operation.

Mr. Felix Amieyefori Valentine, Managing Director, Energia Limited, an indigenous oil firm, disclosed that his company and four others – Midwestern Oil and Gas, Pillar Oil, Chorus Energy and Platform Petroleum Limited, lost about $72 million (N11.448 billion) in 2012 alone to illegal bunkering, crude theft and pipeline vandalisation.

He said: “Our cluster group lost about $72 million to crude theft in 2012 alone and at the rate we are going; this might increase to $100 million (N16.9 billion) in 2013. This got us thinking and we considered building a refinery.”

He disclosed that the decision of the group to set up a refinery in the country, pending approval by the necessary authorities, is in response to the high rate of illegal bunkering, pipeline vandalism.

He said the move is also expected to prepare the country for an eventual reduction in crude export brought about by major discoveries around the world and stoppage of United States’ crude import from Nigeria.

He disclosed that the refinery will reduce oil bunkering, as limited quantities will be available to steal.

Securing operating facilities
“On a typical oil rig, there are about 40 members of the Joint Task Force, JTF, and other security personnel fully paid for by the oil companies. This is not to mention the huge number of security personnel guarding our other installations across the country,” a source who chose not to be named told Sweetcrude.

Minister of Petroleum, Alison-Madueke and NNPC GMD, Andrew Yakubu
Minister of Petroleum, Alison-Madueke and NNPC GMD, Andrew Yakubu

The source stated that all these are adding up to the costs, making it difficult for oil firms to operate successfully.

Manager, Government/Community Relations, Shell Petroleum Development Company, Mr. Evans Krukrubo, said over 90 per cent of its pipelines in the region have been ruptured by suspected oil thieves.

He also noted that the recent upsurge in illegal refining businesses in the Niger Delta should be a major concern to all stakeholders.

He blamed most of the spills in the Delta on crude oil theft and illegal refineries compared with operational failures. “We are not worried by the money lost by SPDC, but the harm and destruction done the environment,” he said.

He identified Bodo, in Rivers State, Imo River, Nembe Creek Trunklines NCTL and offshore of the Niger Delta as major hotspots for oil bunkering and sabotage.

Krukrubo called on security agencies and state government to assist the firm in curbing the activities of oil thieves and illegal refinery operators.

Economic sabotage
Commenting on the development, Comrade Abudlwaheed Omar, President, Nigerian Labour Congress, NLC, expressed concern over the high rate of illegal bunkering and pipeline vandalisation in Nigeria, warning that it could ruin the nation’s economy if not immediately checked.

He argued that a situation whereby nearly 50 per cent of Nigeria’s crude was stolen by highly placed individuals and other criminals, is dangerous for the nation’s economy and survival.

He also called on President Goodluck Jonathan to take necessary actions to stop this show of shame.

In his own view, Mr. Afe Mayowa, immediate past president of the National Association of Petroleum Explorationists, NAPE, said, “Vandalism is not restricted to Niger Delta. It now occurs in Ogun, Ondo, Lagos and other areas where we have pipelines. Therefore, the decline in Nigeria’s reserves will go on and it will definitely affect our economy negatively.”

Also commenting, oil workers, under the aegis of Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, expressed concern over the consistent decline in Nigeria’s crude oil production over the last couple of months.

NUPENG blamed the drop on persistent crude oil theft and pipeline vandalism and urged the Federal Government to take urgent measures to stem the decline, to ensure that revenue accruing to the government was not affected.

According to NUPENG, government must change tactics and strategies in the fight against crude oil theft and pipeline vandalism.

“We urge the Federal Government to introduce a new technology like monitoring sensors and alarm systems that will be triggered off whenever any pipeline is tampered with. Also, collaboration of the host communities where these pipelines traverse would check crude oil theft from the pipelines,” the Union said.

NUPENG also suggested that if the Nigerian National Petroleum Corporation, NNPC, could bury the pipelines deeply underground, the pipelines would become inaccessible to oil thieves and the vandals.

Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, recently estimated that the country loses about N954 billion ($6 billion) to crude oil theft annually, while the Pipeline Product Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) said Nigeria lost a total of N162.6 billion from crude oil and petroleum products pipeline losses between 2009 and 2012.

Last year, Mrs. Diezani Allison-Madueke, Minister of Petroleum Resources said Nigeria lost about N1.908 trillion ($12 billion) to pipeline vandalisation and oil theft in 2011, while adding that of the total amount, $5 billion was spent on pipeline repairs, while the amount lost to crude theft was valued at $7 billion.

Confirming this, Minister of Finance, Mrs. Ngozi Okonjo-Iweala, said Nigeria is losing an estimated 400,000 barrels per day (bpd) of crude oil, resulting in about 17 per cent reduction in export sales, costing the nation’s treasury about $14 billion in 2011 alone.

Crude theft encouraged by global support
Speaking in an interview recently, Allison-Madueke, said: “The very powerful, very well funded cabals drill holes in the pipelines to draw off the oil. It is cracked and transported via separate pipelines to barges close to shore, which move it to ships further out.

“Those ships are going to refineries around the world. When the refineries refine that product, the fiscal output and profit is laundered through fiscal entities in other regions of the world. That answers why the global community needs to assist.” she said.

Okonjo-Iweala also disclosed that Nigeria’s crude oil production now hovers around 1.3 million barrels per day due to the rising incidences of oil theft.

She said that crude theft had continued unabated and is at its highest level ever despite the best effort by government to stem the tide.

With ships, advanced tools and implements beyond the reach of the average Nigerian, oil thieves have over the years impoverished the generality of Nigerians, raking in trillions of naira annually with impunity from their nefarious activities.

The activities of these individuals have on a number of occasions, crippled crude oil supply, distribution and export, depriving the country of a large chunk of earnings from sale of crude oil and other associate products.

Fuelling national insecurity
It is alleged that the oil thieves are using proceeds from the illicit trade to run other criminal operations, including kidnapping, piracy, and hostage-taking.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.