• Sunday, April 21, 2024
businessday logo


Oil companies lose N803bn to sabotaged pipelines

Oil companies lose N803bn to sabotaged pipelines

Oil companies operating in Nigeria lost N803 billion worth of crude oil to spills suspected to emanate from sabotaged pipelines and operational issues in 2022, the highest in three years, according to the National Oil Spill Detection and Response Agency (NOSDRA).

Data from the oil spill agency shows that the country lost N362 billion in 2020, N674 billion in 2021 and N803 in 2022.

Established in 2006, NOSDRA is responsible for coordinating and implementing the national oil spill contingency plan and establishing the mechanism to monitor and assist or, where necessary, direct the response.

Energy experts say the increase in oil theft, pipeline vandalism and security inefficiency worsened spills from pipelines last year. NOSDRA also said poorly maintained infrastructure and accidents may have played a role.

Etulan Adu, an oil and gas production engineer, said the major challenge has been the rapid increase in the level of bunkering and illegal pipeline vandalism.

“The failure of security agencies to protect the trunk lines has led to a proliferation of the system. The situation got worse when former militants were not carried along on the pipeline surveillance contracts,” Adu said.

The increase in pipeline vandalism and oil theft occurred the most in 2022, as the country saw its oil output dip below 1 million barrels per day (bpd) in August and September.

According to data from the Nigerian Upstream Petroleum Regulatory Commission, crude oil production fell by 23 percent between 2020 and 2022.

Data from the regulatory body shows that the country’s oil production averaged 1.49 million bpd in 2020, 1.31 million bpd in 2021 and 1.14 million bpd in 2022.

For Chinedu Onyegbula, an energy sector expert and director at Bullox Resources Limited, the challenge with oil spills is due to unforced laws and regulations.

“Once we commit ourselves to do the right thing and put the right structures in place, oil spills will reduce drastically and disappear,” he said.

NOSDRA said 18,733 barrels of oil were spilled last year, which is equivalent to 94 oil tanker trucks. It added that over 2,500 barrels of crude oil were spilled on land, swamp, shoreline and open sea.

Nigeria is not just losing money from the oil spills but its environment is becoming contaminated. The spill has led to the outbreak of waterborne and skin diseases in the affected communities.

According to a statement by the agency, oil spills are caused by breaks in ageing or poorly maintained infrastructure, accidents, vandalism and other incidents.

“In the past 10 years, a number of spills have also been caused by oil theft, also known as bunkering. This is where oil is stolen from pipelines and then shipped to local or international markets,” it said. “There has also been an increase in artisanal refining when camps in the mangrove refine crude for local or other needs. These are unregulated and so can cause serious pollution.”

Read also: Nigeria’s December oil rig count highest in 2022

On penalties for the oil spills, the agency said there are no legally binding regulatory penalties or fines for oil spills in Nigeria.

“Currently oil companies are required to fund the clean-up of each spill and usually pay compensation to local communities affected if the spill was the company’s fault,” it said.

Last month, Shell Petroleum Development Company of Nigeria Ltd said it would pay 15 million euros to communities in Nigeria that were affected by multiple oil pipeline leaks in the Niger Delta.

Following the judgments of the Court of Appeal of The Hague on January 29, 2021, Shell and Milieudefensie have negotiated a settlement for the benefit of the communities of Oruma, Goi and Ikot Ada Udo in Nigeria, impacted by four oil spills that occurred between 2004 and 2007.

According to the energy company, the settlement is on a no-admission of liability basis, and settles all claims and ends all pending litigation related to the oil spills.