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Analysts predict higher govt. revenue as Pan Ocean unveils 67-kilometer pipeline

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The Amukpe-Escravos Pipeline Project (AEPP), which is scheduled to be unveiled for use in June 2019 by Pan Ocean Oil Corporation is a game changer that portends higher government revenues, analysts have said.

Pan Ocean

The 67-kilometer pipeline which was jointly initiated by the Nigerian National Petroleum Corporation (NNPC) and Pan Ocean will evacuate crude oil from the northern fringe of the Niger Delta to Escravos export terminal.

Before the completion of the AEPP, the major evacuation pipeline available to producers was the Trans Forcados Pipeline (TFP) which was plagued by outages, disruptions and losses. Frequent ruptures and vandal disruptions made the pipeline unreliable especially in the creeks and swamps leading to huge revenue loss for the country.

According to Stanley Mudjere, an energy analyst and lawyer, “it is always good to have an alternative especially in the oil and gas industry which has become more volatile in Nigeria.” “If you consider the fact that the Trans Focardos Pipeline has suffered so much outages you know that an alternative is a welcome development. This pipeline will serve companies including Seplat, NPDC, Enageed, Summit, Newcross Petroleum, Continental Oil & Gas Pan Ocean PSC and boost government revenue, Mudjere said.

In the period between February 2016 and early 2017, disruptions on the Trans-Forcados Pipeline forced oil producers to lock-in output, a situation which caused the Nigerian government considerable budgetary strains, and for crude oil producers, lean bottom lines.

Trans-Forcados Pipeline was shut down for 305 days in 2016, and more than 182 days in 2017. In the 2006-2007 and 2009 periods, total crude deferred due to downtime of Trans-Forcados Pipeline by Pan Ocean alone was 16.2mmbbls, an equivalent of $812million (assuming a price of $50/bbl). In the 2016-2017 period, total crude deferred due to downtime was 3.7mmbbls, equivalent to $188million. These losses applied to most of the crude producers who are expected to use the Amukpe-Escravos pipeline in the near future.

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Buchi Ejiogu, an energy analyst with an investment bank in Lagos says, “in the past we say a drop in government revenues as a result of disruptions, with this new pipeline, those fears are alleviated in the location of the pipeline.”

The new pipeline system was designed to minimise vandalism and mitigate loss of revenue occasioned by ruptures and vandalism. It has capacity to deliver 160,000 barrels of crude oil per day and was constructed over an 8-year period using Horizontal Directional Drilling (HDD) technology.

Horizontal Directional Drilling (HDD) technology is an installation method which ensures minimal ecological and environmental disruption. The entire length of the AEPP is several feet underground to prevent interference of vandals, farming activities and construction. It is the longest of its kind in Africa.

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Pan Ocean also plans to unveil two other projects in June: the Ovade-Ogharefe Gas Processing Plant Phases I & II and OML 147 Early Production Facility at Owa-Alidinma. Speaking on the development, Collins Akinkugbe, General Manager (OML 147 Asset), said “with the support of our joint venture, financial and technical partners, our team delivered these world-class projects safely and with the highest consideration for environmental impact.”

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