• Thursday, July 25, 2024
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BusinessDay

Securing Nigeria’s pipelines will save $700m monthly — FDC

NNPCL uncovers 162 illegal pipeline connections in N/Delta

Securing Nigeria’s 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 explored, may save Africa’s biggest economy $700 a month, BusinessDay has learnt.

Analysts at Financial Derivatives Company Limited (FDC) said that the deal between Tantila Security Services Limited, a company owned by Government Oweizide Ekpemupolo alias Tompolo, and the Nigerian National Petroleum Company (NNPC) Limited is set to save $700 million a month of lost revenue for the nation.

“Tompolo deal may salvage $700mn monthly,” FDC said in its LBS October report.

Faced with dwindling revenue and growing debt, the Federal Government was forced to renew its oil pipeline surveillance contract with the leader of the defunct Movement for the Emancipation of the Niger Delta (MEND)—Tompolo.

A contract, which was first initiated by Diezani Alison-Madueke, the former minister of Petroleum Resources under the administration of ex-President Goodluck Jonathan in 2014.

Mele Kyari, the Group Managing Director of NNPC Limited, justified the contract award to Tantila Security Services Limited, arguing that as much as 500,000 barrels of crude oil were being stolen daily.

He noted that it was a despicable situation that amounted to around $38 million in lost revenue to the nation—using a $95 per barrel benchmark for London Brent as of September, 2023.

“The security agencies are doing their part. End-to-end pipeline surveillance would require the involvement of private entities and community stakeholders,” Kyari said, adding that the collaborative effort of the security agencies and the private contractors would help deal with the revenue leakage problem.

Accordingly, the contract is worth N4 billion monthly and involves high-level surveillance of oil wells and pipelines in the entire creeks of the Niger Delta and the identification and reporting of unidentified vessels and batches to any of the Nigerian security agencies.

Despite the dust raised about the contract, the NNPC boss believes that the financial muscle and in-depth knowledge of the terrain give Tompolo’s company the edge over others.

BusinessDay learnt that before the cancellation of Tompolo’s contract in 2015, the arrangements he put in place had tackled illegal bunkering and increased Nigeria’s production to nearly two million barrels per day.

Nigeria's oil production
Nigeria’s oil production

The culpability of the Nigerian security agencies in the theft of crude oil was vindicated by the recent discovery of illegal oil pipelines by Tompolo. As many as 58 illegal tapping points used by crude oil thieves in Delta and Bayelsa States are part of the score points of this deal.

The discovery of the tapping points is likely to save an additional 150,000 barrels for the NNPC.

Read also: NNPC’s cash-for-crude deals to raise $5.6bn

Perhaps, the most celebrated achievement of the Tompolo—NNPC partnership is the discovery of an illegal oil tanker with loads of stolen barrels of crude oil.

The outcome of the deal would not only arrest the massive revenue leakage but also increase investor confidence in the oil and gas sector.

Analysts at FDC believe that the benefits from the Tompolo—NNPC deal would help the CBN intervene more effectively in the forex market, with the possibility of the naira’s stability becoming a more realistic outcome.

“Hopefully, the injection of dollars into the coffers of the CBN would help the CBN intervene aggressively in the FX market and arrest the decline of the naira,” Stella, C.E.O of Dantel Oil & Gas Service Limited, said.

However, some industry experts say the oil-rich Niger Delta could face more danger on the back of the Federal Government’s renewed engagement with ex-militants.

A military officer familiar with the Niger Delta region told BusinessDay that awarding a N4billion monthly contract to a former Niger Delta militant is a negative signal for a highly volatile region littered with diverse militant groups.

He said that the appetite of militants was difficult to control as most of them resort to oil theft, which frequently results in pipeline ruptures, leaks, and force majeure on crude production and exports.