• Thursday, May 23, 2024
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Nigeria fails in bid to restore 0.3mbpd oil pipeline

Nigeria fails in bid to restore 300,000bpd oil export via TNP

Desperate attempts by Nigeria to revive the crucial Trans Niger Pipeline (TNP) and raise oil export by as much as 300,000 barrels per day (bpd) have suffered a massive setback, BusinessDay has learnt.

Two weeks ago, oil company chiefs and senior officers of the Nigerian National Petroleum Company Limited set out to begin the process of passing crude oil through the pipeline after nearly a year of being abandoned.

The pipeline is capable of earning an additional $900,000 of oil proceeds for Nigeria every month and helping mitigate the country’s desperate foreign exchange shortage.

BusinessDay learnt that about two weeks ago, a decision was reached to begin the restoration in phases with crude oil producers including Shell and Heirs Holdings Oil and Gas Limited willing to start controlled injection of oil through the pipeline in staggered volumes.

The hope was that government security chiefs can then be better advised on the most vulnerable links along the pipeline. The Bodo community was the last of such villages where salvage teams were able to enter to effect repairs along the pipeline. It was learnt that leaders of the community gave the government conditions for allowing technical teams to enter the village to fix the pipeline.

According to one senior oil chief involved, the initial recovery factor was in the region of 82 percent but this suddenly collapsed to under 55 percent between Monday and Tuesday this week.

For weeks, water was passed through the pipeline and the recovery rate achieved topped 90 percent. It is now suspected that multiple leakages have developed as the oil thieves have simply moved to new locations.

The oil producers are now so frustrated they do not hope the pipeline will become available till early next year at best. They also suspect high level collusion by some in government.

One senior official of an oil company told BusinessDay Tuesday night: “We cannot continue to spend huge resources drilling oil when we are earning nothing from the effort.”

Energy experts say this development will hurt the country’s revenue, foster underinvestment in the sector, and underemployment of expertise.

“The implications are that revenue projection expectations from that stream will be hampered and continued fears about Nigeria’s willingness and capacity to enforce contracts and curb the menace of oil theft will continue to grow,” said Chinedu Onyegbula, an energy specialist.

He said the development becomes worse as the country’s inability to earn desperately needed foreign exchange to strengthen the naira amidst an increasingly widening gap will continue to exist.

“The implications are that despite the recent efforts to protect our oil and gas infrastructure and improve governance of the sector, a lot more needs to be done, otherwise, there’s the risk of investor and capital flight, weak confidence in the economy and invariably the currency, and low production capacity which would affect our revenues and forex liquidity,” he said.

However, the energy specialist was optimistic about the new contract on securing the pipelines.

“It’s about our only hope since requiring or recommending using appropriate technology mechanisms to check and curb these actions has failed,” he said.

In August, the federal government awarded an N4 billion pipeline surveillance contract to Government Tompolo, a development that has led to the discovery and seizure of illegal pipelines and vessels months later.

Bolade Agboola, an energy analyst at Meristem Securities Limited, said this development will discourage investment in the sector and may lead to the laying off of staff, amongst other things.

She said: “For the country, oil is one of the major sources of revenue and foreign exchange… Lower production volumes imply lesser revenue to be generated despite higher oil prices.

“One of the assumptions on which the 2023 budget was set was 1.6mbpd oil production. If the country is unable to meet this target or close enough, this questions the feasibility of the budget as the global oil price is not within the control of the government. This may lead to a higher deficit in the budget.”

Last month, Bala Wunti, group general manager of the National Petroleum Investment Management Services (NAPIMS), announced that technical teams of the NNPC had concluded the clamping of the damaged pipeline (TNP) in the Niger Delta.

He had said: “Today, we achieved another great milestone on my second trip (within a week) to Bodo community. The faulty section of the Trans Niger Pipeline was clamped, and the spillage successfully stopped. With the completion of repairs, environmental remediation will commence in earnest.

Read also: NNPCL revenue falls short by N67.7bn in 7 months

“We will all go to bed feeling better tonight, knowing that the oil spill into the Bodo community has successfully been contained and that NNPC’s trust-rebuilding efforts with our beloved host community have fully taken shape and are paying off. All the parties have respected the outcome of the open discussions that led to this moment. In the coming days, not only will the Bodo community indigenes live in a cleaner and healthier environment, but the nation will also receive much-needed relief.

“Watching the contractors plug the leak and tighten the bolts to hold the clamp in place was gratifying. This memory will live with me forever.”

At one point, up to 90 percent of crude oil passed through the pipeline and was said to have been stolen. This forced the oil firms to shut in their wells and stopped producing with Nigeria’s export level falling to below 1m barrels daily.

Decrying pipeline vandalism and theft recently, Festus Osifo, president of the Petroleum and Natural Gas Senior Staff Association of Nigeria, lamented that just between 5–10 percent of crude oil metered from the operators gets to the terminal.