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By Udeme Akpan, Energy Editor

Nigeria’s average oil output dropped year-on-year, YoY, by 13.5 per cent to 1.2 million barrels per day, mb/d in the first eight months of 2022, from 1.4 mb/d in the corresponding period of 2021, according to data compiled from the reports of the Nigerian Upstream Petroleum Regulatory Commission, NUPRC.

The output level has already gone down below 1.0 mb/d by last month and if nothing drastic is done, the worse is underway.

The data obtained from the reports – Crude Oil and Condensate Production – by Vanguard, also shows that on Month-on-Month, MoM, the nation’s output dropped by 10.2 per cent to 972,394 mb/d in August 2022, from 1,083,899 mb/d recorded in July this year.

The reports did not disclose factors responsible for the continued drop in output, but checks by Vanguard attributed it to the increasing oil theft in the Niger Delta.

Oil firms raise the alarm

It also showed that the operations of International Oil Companies, IoCs, and their indigenous counterparts have been affected.

The Shell Petroleum Development Company Limited, in its briefing notes obtained by Vanguard, stated: “Shell Companies in Nigeria have a track record of strong production. But in 2021, the combined production from the SPDC JV and SNEPCo (Bonga) fell to 493,000 barrels of oil equivalent per day from 614,000 in 2020.

“The SPDC JV produced 383,000 barrels of oil equivalent in 2021, compared with 497,000 barrels of oil equivalent in 2020. The fall in output was largely a result of curtailed oil production because of heightened security issues, such as crude oil theft and illegal oil refining. Production numbers were also down as a result of divestment action, including the sale of SPDC’s 30% interest in OML 17 for $533 million.”

How it works

Checks by Vanguard showed that various levels of theft abound, including the small and medium scales, who steal and supply the oil to owners of the illegal refineries. 

It also included the operators of illegal refineries who locate their bases close to available crude pipelines in remote areas as well as large-scale thieves who liaise with organized syndicates overseas and some security agents to perpetuate the crime.

Impacts

The prolonged theft has impacted negatively on not only the oil producing companies but also the industry and nation’s economy.

It has crippled the output and revenues of producers and by extension the ability of the Federal Government to meet Nigeria’s output quota given by the Organization of Petroleum Countries, OPEC.

According to the September 2022 OPEC Monthly Oil Market Report, MOMR, obtained by Vanguard, the nation struggled to produce 972,000 bp/d, excluding condensate in August 2022, indicating a shortfall of over 854,000 bp/d, when put against its 1.826 million bp/d OPEC quota, during the period.

It also resulted to huge loss of revenue as the sale of 854,000 bp/d could have amounted to about $85.4 million daily at the current price of $100 per barrel, which could have gone a long way in reducing Nigeria’s huge reliance on foreign loans.

Early this year, the Minister of Finance, Budget and National Planning, Zainab Ahmed, had disclosed that Nigeria’s overall deficit of N6.39 trillion appropriated in the 2022 budget would be financed mainly by borrowings as a result of limited funds.

Checks by Vanguard showed that there are also unquantified losses, including several damages done to the environment, which also affect human health and aquatic creations or animals.

Regulatory,  others insights

Responding to the situation, the Chief Executive of NUPRC, Mr. Gbenga Komolafe, noted that the development has threatened operations in the industry.

He explained that the frequent oil theft has culminated in the declaration of force majeure at Bonny Oil & Gas Terminal (BOGT) and the shut-in of wells from fields evacuating through the Nembe Creek Trunk Line (NCTL) and the Trans Niger Pipeline (TNP).

He said: “The challenges of seamless production in the form of rampant crude theft and sabotage of critical infrastructure are still with us. The Commission has developed some key initiatives aimed at reducing the menace to the barest minimum in the short run, and eventual elimination in the long run, such as the roadmap for tackling the security challenges in the industry: Identification/implementing areas of collaboration between the government and operators and ensuring that operators realize their full production potential.

“They also include, liaison with the top echelon of Nigerian Security Forces for a robust security framework that ensures Government Security Forces provide pipeline and asset security; promote the implementation of nodal surveillance technologies on the main trunk lines at each manifold for real-time loss detection that will enable swift and more proactive responses; enforce installation of tamper detection technologies as part of designs for pipeline and related oil & gas production facilities for approval of the Commission.

“Ensure that Operators implement approved security protocols in areas within their control and promptly identify/remove illegal connections and conduct remedial works in record time. Public Enlightenment Campaign to educate citizens on the dangers associated with crude oil theft and pipeline vandalism, in collaboration with relevant agencies such as the National Orientation Agency.”

Similarly, the Nigerian National Petroleum Company Limited said it has already launched an applications platform to monitor crude oil theft in the country.

The Group Chief Executive of the company,  Mr. Kyari, said, “the actions of vandals on pipelines have become a difficult thing to deal with. There are still ongoing activities of oil thieves and vandals on our pipelines and assets, very visible in the form of illegal refineries that are continuously put up in some locations and insertions into our pipeline network.

“Arrests have been made and vessels have been arrested by the Nigerian Navy, I commend the Armed forces, in the last three months, they have done substantive work and have destroyed some illegal refineries.

Also, the Nigerian Navy, NN, had said it destroyed assets worth over N30 billion belonging to illegal refinery operators in the Niger Delta, in its war against oil theft.

Commodore Adedotun Ayo-Vaughan, Director of Information, NN, who disclosed this during a recent visit to Vanguard, said: “As we speak, we have operation Dakata Dabarawo ongoing. The operation was launched by the Navy, in collaboration with the NNPCL to stop the oil thieves.

“So far, we have been able to stop the thieves because the Navy has put a lot of the artisan refiners out of business. It takes a lot of money to set up an illegal refinery, meaning that the destruction is very negatively impacting to them.

“We have been destroying these illegal refineries, we usually collate the figures in my office. The last time we collated the figures, they amounted to over N30 billion.”

The NN spokesman also disclosed that the Navy has requested Equatorial Guinea to release a supertanker, MV Heroic Idun, to face an investigation in Nigeria.

He stated: “The vessel was detected within our maritime space 85 nautical miles from the coast, that is about 170 kilometres southwards, within our Economic Exclusive Zone, but in the international waters.

“The vessel disregarded a Navy vessel because the name of the vessel was not on the tanker nomination by the NNPCL. Navy officials said because it was not listed, the vessel would not be allowed to proceed, it disobeyed and sailed off.

“The vessel that went to accost it, NNS BONGOLA, is an inshore patrol vessel, meaning that its operations are inshore with limited endurance. It has to refuel after two days and could not pursue the MT Heroic Idun, which was a giant tanker. So, it went back, but we kept on tracking MT Heroic Idun”.

Lasting solution

However, in a telephone interview with Vanguard, Professor Emeritus in Petroleum Economics and Executive Director, Emmanuel Egbogah Foundation, Prof. Omowumi O. Iledare, said: “The main solution is enforcement of the rule of law, accountability and withdrawal of emoluments to community found liable. No society can thrive if criminality is perpetuated without recourse.”