Nigeria loses $2bn in 13 months to disruptions in crude productions

Nigeria lost a total of $2 billion in 13 months due to fire outbreaks or shutting of production from leaking pipelines carrying crude oil from wells to flow stations in the Niger Delta, where more than 90 percent of the country’s crude is produced.

The loss comes from 39.9 million barrels of crude oil that it could not take to the market due to shut-in of pipelines as stated by the Nigerian National Petroleum Corporation (NNPC) in its FAAC reports from January 2020 to March 2021.

The loss means Nigeria threw away a big opportunity of injecting about $2billion into its ailing economy, using the average price of the international Brent crude, the benchmark for Nigerian crude oil which sold for an average price of $50 in 2020 and $57.22 in January 2021.

“Every day, there is always an oil company facing incident of oil theft or bunkering,” Bolaji Ogundare, who runs an indigenous oil and gas company Newcross Exploration and Production Limited with operations in the Niger Delta Region said.

“With bunkering comes spillage; this also lead to environmental cleanup, which automatically leads to higher cost of production,” Ogundare told Businessday.

In Africa’s biggest oil-producing country, petroleum and associated products are transported through an extensive network of pipelines in the Niger Delta.

They are usually susceptible to sabotage from militants who usually break the pipelines to illegally tap crude oil. But sources in the oil and gas industry also admit that most of the pipelines are old and hence easily susceptible to damage and leakages.

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The NNPC’s FAAC report revealed that the pipelines leading to eight loading terminals for crude exports suffered major leakages costing the country several millions of dollars in lost revenue.

In January 2020, the production disruption cost Nigeria 2.7 million (2,644,900) barrels of crude oil valued around $132 million, thanks to major disruption came from the shutdown due to leaks at Bonny terminal. Only the Bonny shutdown which lasted 15 days led to the cumulative loss of 1.9 million (1,950,000) barrels.

“This was due to oil spillage at Nembe Creek Trunk Line (NCTL),” NNPC said in its January 2020 FAAC report.

In February 202o, an analysis of NNPC’s FAAC report Nigeria lost 1.9 million (1,972,653) barrels valued at around $98.6 million. This increased by over 30 per cent to 2.9 million (2,925,500) in March 2020, due to a 23 days community protest at Tulja terminal.

In April, the rate of losses climbed to a new high of up to 3.9 million (3,928,003) million barrels for the year valued at around $196.4 million, thanks to major shutdowns at Egina terminal which cumulatively lasted for eight days due to power outage.

“Cumulative production loss from Egina terminal alone stood at 441,443 barrels,” NNPC admitted.

Nigeria also records a production loss of 4.3 million (4,324,147) barrels in May 2020, 3.8 million (3,828,894) barrels loss in June 2020 and 3.0 million (3,049,216) barrels in July 2020, all of which are worth a combined $560 million.

The trend didn’t abate in August with a loss of 1.4 million (1,431,645) barrels valued at $71.5 million, while production losses for September and

October worth a combined $183.9 million stood at 1.8 million barrels (1,857,665) and 1.8 million (1,822,778) barrels respectively.

In December 2020, production losses hit an all-year high of 6.4 million (6,462,510) barrels worth $323.1 million from 2.0 million (2,016,753) in November 2020. In January, production losses stood at 3.6 million (3,678,000) worth $210.4 million.

Sources in the oil and gas industry have told BusinessDay that the country’s pipelines are not only old but are poorly secured, thereby making them easy targets of repetitive attacks by vandals.

The $2 trillion (N697.6bn at average 2020 US$/N348.8) loss is much higher than N1 trillion transferred by the NNPC into the Federation Account in 12 months, representing a significant loss of revenues to both the federation and state governments who are already struggling with significant revenue shortfalls, forcing them to resort to raising debt to finance their governance obligations.

Ademola Henry, an oil and gas expert questioned why the government is still operating pipelines when it is such a high-cost centre.

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