Oil firms express concern about existential threat
By Jeph Ajobaju, Chief Copy Editor
Local and international oil companies (IOCs) have expressed concern about their survival as oil theft in the 14 months from January 2021 to February 2022 bled $3.27 billion from them and the national economy, which the government announced.
Their fear was discussed at a meeting held in Abuja between the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Oil Producers Trade Section (OPTS), and Independent Petroleum Producers Group (IPPG).
OPTS comprises IOCs operating in Nigeria. IPPG is an association of indigenous exploration and production companies.
NUPRC made a presentation on how oil theft rose sharply between 2021 and 2022, and IPPG said about 91 per cent of crude produced at Bonny Terminal was stolen in January 2022.
“Total value loss for the period January 2021 to February 2022 is about $3.27bn. Average monthly value loss for the period is about $233.99m. Average daily value loss for the period is about $7.72m.
“Losses are mainly from Bonny Terminal Network, Forcados Terminal Network (and) Brass Terminal Network,” NUPRC lamented.
It listed factors aiding oil theft to include inadequate security, poor community engagement, economic challenges, poor surveillance, stakeholder compromises, and exposed facilities.
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Organised criminal activity
OPTS Chairman and Chevron Nigeria Managing Director Rick Kennedy, who spoke for IOCs at the meeting, described the huge oil theft as an organised criminal activity, per reporting by The PUNCH.
“When I say it is an organised criminality, the sophistication of the engineering involved points towards a high degree of sophistication and technology, as well as the distribution.
“I think we’ve just got to be honest and accept that this is not theft but more than that,” said Kennedy, who was represented by ExxonMobil Nigeria Managing Director Richard Laing
The IOCs called for a quick solution to the menace which they said poses a serious threat to their existence.
“It is important that the federal government, industry, and a whole bunch of other stakeholders find a solution and find it quickly. That will be my strong advice,” Kennedy added.
Host communities in on the crime
IPPG Chairman Abdulrazaq Isa said the criminal operation is being extended to host communities and must be stopped now before it is too late.
“This is a massive criminal operation and is now being extended into the communities as they’ve been dragged into it,” said Isa, who was represented by Waltersmith Petroman Oil Managing Director, Chikezie Nwosu.
“In December 2021,” Isa disclosed, “the overall theft or what was stolen from the line was 91 per cent of the crude.
“That means for every 100 barrels, all that got to the Bonny Terminal was nine barrels. In January this year it improved to 75 per cent but in February it went back to 82 per cent.”
He argued that independent producers can no longer survive “and that is why I’m talking about the urgency. The critical part of this problem started in 2021.
“Prior to that, you could still survive with crude oil theft when it was still single digit in terms of percentages.
“But in 2021, we saw it rising slowly from 12, 15, 40 to 91 per cent in January this year. And you cannot survive with this. If you produce 100 barrels of crude, all you get at the end of the day for export is nine or 10 barrels. How can you survive?”
Tackling the problems
NUPRC noted in its report that
- Government revenue has been adversely affected
- Independent producers suffer additional loss of value from surging costs of frequent repairs of damaged facilities.
- Spillages and leakages are caused mostly by saboteurs, leading to environmental degradation and deprivation of sources of livelihood to host communities.
- Actions are being taken to mitigate the effects of oil theft and pipeline vandalism, as a team of regulators sand operators was set up in August 2021 to tackle the problems.
“The work team was set up to deliberate on workable solutions to mitigate crude oil losses, identify various responsible parties along the crude oil loss value chain and propose improvement areas for effective surveillance,” the NUPRC explained.
It disclosed that draft regulations are in place and further engagement with stakeholders is underway on the implementation of host community provisions in the Petroleum Industry Act (PIA).
Abuja eager to increase oil production
NUPRC Chief Executive Gbenga Komolafe said “the meeting was convened to get the opinion of stakeholders, especially the investors, which include the OPTS and IPPG. It is the concern of the government that we increase our oil production.
“Because when the upstream is sick, it affects the wellbeing and health of the country. The situation is happening in upstream and is a threat to the existence and wellbeing of the economy.
“So we are very concerned about this and we’ve been doing a lot and will ensure that we do everything possible to increase oil production in a manner that will make the nation benefit from the upward movement in the international prices of crude.”