November 28, 2022

$15.4bn lost to oil production shortfalls in 2022

–Nigeria earned $741bn in 22 years, NEITI

By Obas Esiedesa

Nigeria’s oil production averaged 1.34 million barrels per day in the first 10 months of 2022 against the 2022 Budget benchmark of 1.88 million barrels per day, costing the nation about 161.58 million barrels in lost production.

At an average crude oil price of $95 per barrel it means the country lost about $15.35 billion in estimated earnings.

Latest data by the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, showed that total oil production for the first ten months was 409.94 million barrels against the budget provision of 571.5 million barrels.

The data also showed that oil production fell in the first 10 months of 2022 by 21.37 percent when compared to 497.55 million barrels of oil produced over a similar period in 2021.

According to the Budget Office, Gross Oil Revenue amounting to N2,172.35 billion was collected in the first half of 2022 as against N4,684.98 billion prorate budget projection for the period. This denotes a decrease of N2,512.63 billion (53.63 percent) below the 2022 half year budget estimate.

The agency stated that it was, however, an increase of N272.56 billion (14.35 percent) above the actual half year gross oil revenue performance reported in 2021. A breakdown of the revenue by sub-head showed that only Crude Oil and Gas Sales of N489.38 billion surpassed its half year projection of N437.03 billion by N52.35 billion (11.98 percent).

It stated that other Oil Revenue items fell below their respective half year projections. Petroleum Profit and Gas Taxes of N909.56 billion, Royalties (Oil & Gas) of N750.93 billion, Concessional Rentals of N1.88 billion, Gas Flared Penalty of N39.19 billion, Incidental Oil Revenue (Royalty Recovery & Marginal Field Licenses) of N22.04 billion and Miscellaneous (Pipeline fees etc.) of N7.94 billion fell below their half year projections of N2,786.15 billion, N1,277.0 billion, N3.21 billion, N55.27 billion, N97.54 billion and N28.78 billion by N1,876.59 billion (67.35 percent), N526.07 billion (41.20 percent), N1.32 billion (41.26 percent), N16.08 billion (29.09 percent), N75.51 billion (77.41 percent) and N20.84 billion (72.40 percent) respectively.

Nigeria earned $741bn in 22 years – NEITI

The Nigeria Extractive Industries Transparency Initiative, NEITI, has disclosed that Nigeria earned 741.48 billion dollars from oil and gas between 1999 and 2020.

This was as it maintained that the successful implementation of the Petroleum Industry Act, PIA, remains inviolate for increasing the nation’s oil revenues.

The Executive Secretary, Dr. Orji Ogbonnaya Orji, made this known during a stakeholders’ engagement forum on the implementation of the Petroleum Industry Act, in Abuja.

He said NEITI had so far conducted and published 25 cycles of audit reports in the oil and gas sector, spanning the years 1999-2020.

According to him, NEITI has conducted and published twenty-five (25) cycles of audit reports in the oil and gas sector, covering the period 1999-2020.

“From the report, a total of $ 741.48 was recorded as revenue earnings to government coffers from the sector. The 2021 oil and gas sector audit is currently ongoing and will soon be released.

“Besides, NEITI reports have led to the recovery of several billions of dollars by the government from companies operating in the sector. Recommendations of our reports are also triggering huge reforms in the sectors, one of which is the PIA we are discussing here today.

“Let me use this medium to inform our stakeholders that considering the emerging issues in the global EITI, and the NEITI’s obligation under the PIA, the agency is currently working to review its enabling law to accommodate these new developments”, he added.

Orji said NEITI was embarking on an expansion of its operations to support the government’s revenue growth plan.

“This is guided by a five-year strategic plan (2022-2026) which will enable the agency to establish a presence and operate at sub-national levels to support the government’s revenue growth plan and resources mobilisation,” he said.

Nigeria reels from oil theft, pipeline vandalism

The high incidences of oil theft and pipeline vandalism have left the country reeling as production failed to improve despite the high price of crude oil in the international market.

Speaking on the effort to curb the menace, the Group CEO of NNPCL, Mallam Mele Kyari explained that the government was tackling the menace headlong and assured industry operators that oil produced would be successfully evacuated.

“We have put up a very robust framework of ensuring that we contain these menaces and we’re already seeing the results. Needless to say, that they’re still ongoing activities of vandals on our pipelines of oil and assets. This is very visible in the forms of illegal refineries that are continuously put up in some locations and also insertions into our pipeline but we are reacting to it”.

He said the Nigerian government would take action against foreign refineries which buy crude oil stolen from Nigeria, stressing that every crude oil from Nigeria has a registered mark and identification.

Also, the Nigerian Senate has held that crude oil theft and pipeline vandalism are limited to onshore and swamp operators due to their peculiar vulnerabilities.

A committee set up by the Senate to investigate pipe vandalism and its impact on oil production observed that only 66 percent of the country’s oil production can be effectively guaranteed while 33 percent is affected by oil theft and loss in production due to the third party’s easy access on land terrain.

The Committee in its report noted that “there is a plethora of government entities or representatives present at export terminals with duplication of roles and responsibilities leading to conflicting figures being churned out. The government/other agencies include: Customs, Immigration, Ndlea, Inchcape, Port Health, Trobel, Arlington Nig. Ltd., Inspectorate, Sifax Etc

“The configuration of the existing oil production facilities in onshore, offshore and shallow water is integrated in nature because under the Petroleum Act 1969, operations were designed to produce, process and export oil and gas, hence export terminals tend to form a contiguous part with the production and procession infrastructure process thus making activities from the well head to terminal part of upstream operations.

Major export facilities, the Bonny and Forcados Terminals have been shut down for a very long period of time (over 7 months) due to pipeline vandalism and oil theft.

“The oil companies are forced to shut-in production, since bulk of what is produced is not received at the Export Terminal due to rampant cases of third-party interferences/illegal connections on the pipelines leading to huge production losses over the years.

“These shut-in wells have seriously affected the Gas supply to Nigeria Liquefied Natural Gas (NLNG) by 30 percent to 40 percent since most of the produced gas is associated with crude production.

“Production shut-in at Forcados Terminal was due to leakages observed around the loading Buoy and third-party interference at its trunk lines. However, with the intervention of NNPC Ltd and its partner SPDC, this terminal commenced crude export operations in late October, 2022. This we believe is quite commendable. Bonny Terminal which used to export nine tankers of one million barrels/month has not witnessed any export since 10th April, 2022, which is quite unfortunate.

“Oil and Gas producers using the Bonny export terminal at some point resorted to barging the products (crude) for export but were rejected by the NNPC in order to safeguard the huge investment made on the terminal and prevent the “balkanization” of Bonny light crude grade. Heirs Holdings Oil and Gas (operators of Agbada field) have not exported a barrel of crude since April 2022. Since its only evacuation source is through the Trans Nigeria Pipeline (TNP) to Bonny terminal.

“Ebok terminal operated by Oriental Oil and Gas offshore Akwa Ibom State has been exporting without any disruption/theft. This is basically due to its offshore location which is presently difficult to access by criminals. This is a fully integrated facility with a Mobile Offshore Production Unit (MOPU)”.

The Committee found and frowned at the interference of the Federal Ministry of Transport in the deployment of the Advance Crude Cargo Declaration solution which should be the responsibility of the NUPRC, in alignment with its mandate as the technical and commercial upstream regulator under the PIA.

The Committee also frowned at the presence of two regulators at the crude oil export terminals when the PIA had clearly designated the limits of the two petroleum regulators’ respective oversight.

“The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) regulates the midstream/downstream sector only and at no time did the PIA contemplate it to perform crude oil terminal activities regulation, which is an upstream regulatory function and should necessarily include hydrocarbon accounting and crude oil revenue assurance and consolidation, as these are interdependent and contingent on crude oil terminal regulation.

“Crude oil being a product of upstream, in line with its definition under section 318 of the PIA, its Terminals can only be under the regulation of the Upstream Commission for optimal hydrocarbon accounting, ease of doing business and transparency in royalty computation as well as revenue assurance”, it added.

The Committee in its recommendation ordered that the NUPRC should resume full regulatory oversight of all existing crude oil terminals in Nigeria including integrated terminals, crude oil pipelines, issuance of loading clearance and processing of export permit in line with section 8(d) of the PIA, as regulatory activities at crude oil terminals are interdependent and contingent;

“As intended in the PIA, the NMDPRA statutorily should concentrate fully on regulating the midstream and downstream activities i.e. from refineries, mid and downstream gas infrastructure, supply, storage and distribution of refined petroleum products, petrochemicals, virtual pipelines and retailing facilities, in line with the provisions of the PIA, including future stand-alone crude oil and natural gas export terminals;

“There should be an immediate streamlining of the agencies present at the terminals in line with the relevance of their PIA delineated upstream and midstream/downstream statutory functions while NUPRC should strengthen deployment of digital accounting procedures (such as advance cargo declaration, digital integration of LACT units) at all crude oil terminals for transparent hydrocarbon accounting.

“NUPRC should fast track the upgrade of the National Production Monitoring Systems (NPMS) to enable Real Time monitoring of Flow station and Terminal activities. NUPRC should expedite the deployment and strict enforcement of the Advance Crude Oil Cargo Declaration solution for detection and mitigation of illegal movement of vessels, to ensure adequate revenue generation and optimal crude oil accounting, thus enhancing revenue generation for the federation”.