• Saturday, July 13, 2024
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Nigeria spends N126.3bn in one year on pipeline repairs

NNPC urges professionals to find solutions to oil industry challenges

Africa’s biggest oil-producing country spent N126.3 billion between April 2018 and April 2019 on repair and maintenance of 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.

In Nigeria, petroleum and associated products are transported through extensive network of pipelines that run across different locations throughout the country from remote to populated areas.

These pipelines are, however, poorly secured, thereby making them targets of repetitive attacks by vandals and this has cut the country’s revenue from oil and gas by half.

Nigeria incurred a huge cost of N77.74 billion maintaining and repairing its oil pipelines from April 2018 to December 2019, while it incurred another N48.89 billion on keeping its old pipelines active from January to April of 2019, according to report from the Nigeria National Petroleum Corporation (NNPC).

Pipelines vandalism remains a huge challenge to Nigeria. The NNPC report shows the country recorded a total of 2,092 pipelines breaks between July 2018 and July 2019.

“Products theft and vandalism have continued to destroy value and put NNPC at disadvantaged competitive position,” NNPC admitted in its latest report.

The NNPC monthly report for July shows the five terminals that had major shut-in as a result of leakages connecting them to major oil wells include Pennington, Agbami, Erha, Bonny, Qua Iboe, Amenam, Usan, Egina and Bonga terminals.

Combined production shut-in from all the nine terminals in July 2019 was 1.2 million barrels, with a total value of US$75 billion using the average price of the international Brent crude, the benchmark for Nigeria’s crude oil which sold for an average price of $61.48 in July.

Nigeria lost 19,000 bpd worth $1.1 billion at the Pennington Terminal which was shut down due to pipeline leakage, while Agbami Terminal was shut down due to loss of main power, leading to a loss of 77,000 barrels worth $4.7 billion.
Oil production in the Erha Terminal was shut down for two days due to maintenance activity and flare management which led to a loss of 304,490 barrels worth $18.7 billion, while Nembe Creek Trunk Line (NCTL) was shut down for 12 days due to the fire around Awoba manifold leading to a loss of 120,000 bpd to 150,000 bpd.

Trans Niger Pipeline (TNP) leading into Bonny was shut down due to leaks at Owokiri (near Patrick waterside) with a production loss of 120,000 bpd worth $7.3 million.

At Qua Iboe Terminal, there was production shutdown for 12 days due to equipment failure and maintenance of oil facility leading to a cumulative loss of 235,000 barrels worth $14.4 million, while Usan Terminal was shut down for six days due to plant trip incidents with a total loss of 192,460 barrels worth $11.8 million.

Oil production was shut down at Egina due to the trip of safety device which led to a loss of 32,000 bpd worth $1.9 million, while a drop in production at Bonga due to plant shutdown led to a loss of 90,000 barrels worth $5.5 million.
At Amenam Terminal, there was full field shutdown due to integrity work on OML 100 leading to a shortfall of 15,829 bpd, while force majeure declared on OML 102 led to a production loss of 16,000 bpd.

Speaking to BusinessDay on the challenges the NNPC seems to be having with its leaking pipelines, Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), questioned why the government is still operating pipelines when it is such a high-cost centre.

“Anytime NNPC cannot find anywhere to hide expenses that they have incurred, they just record them as losses under pipeline repairs, which is very sad,” Henry said.

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He advised that the Federal Government should “deregulate the sector and commercialise the pipelines and allow them to operate on a tariff model which will further block leakages”.

“The allegation in the industry now is that the biggest beneficiary of pipeline vandalism is the military’s Joint Task Force, which is very sad,” he said.

Both international and local oil companies operating in Nigeria have complained repeatedly in recent years about the growing and brazen nature of oil theft. Damage to pipelines by thieves causes spillages and can prevent the pumping of crude.

A leaked internal document of Royal Dutch Shell revealed that the oil company spent $383 million over three years protecting staff and installations in the Niger Delta region. The oil giant also maintains a 1,200-strong internal police force in Nigeria, plus a network of plainclothes informants.

Few days ago, Nigeria Extractive Industries Transparency Initiative (NEITI) said Nigeria lost about $41.9 billion between 2009 and 2018 to crude theft as well as domestic and refined petroleum products losses, an amount more than the size of the nation’s foreign reserves which stands at $39.8 billion.

NEITI blamed the losses on the government not embracing oil fingerprinting technology, absence of comprehensive metering infrastructure of all oil facilities, and other creative strategies to combat the growing menace of theft of Nigeria’s crude oil and refined petroleum products.

The transparency agency said in the face of current dwindling revenues, paying priority attention to oil theft in the country’s oil and gas industry has become necessary to expand revenue generation.

In addition, the report said Nigeria loses an average of $11 million daily, $349 million in a month and about $4.2 billion annually to crude and product losses arising from stealing, process lapses and pipeline vandalism.

“While figures from the government put the loss at between 150,000-250,000 barrels per day (bpd), data from private studies give an estimate of between 200,000 and 400,000 bpd,” the report said.

“This implies that Nigeria may be losing up to a fifth of its daily crude oil production to oil thieves and pipeline vandals. Stemming the haemorrhage and leakages should be an urgent priority for Nigeria at a time of dwindling revenues and increasing needs,” it said.

In order to solve perennial challenges in the industry such as pipelines vandalism, stakeholders such as Organised Private Sector (OPS), Nigeria Gas Association (NGA), and Nextier SPD, an international development consulting firm based in Nigeria, are scheduled to meet with Timipre Sylva, minister of state for petroleum resources, next month on core industry challenges, opportunities and actions that are essentially required to ensure the reform of the oil and gas sector.