Nigeria lost a total of $295 million in December 2018 due to shut-in 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 8.17 million barrels of crude oil that the Nigerian National Petroleum Corporation (NNPC) said in its December monthly report that it could not take to the market due to shut-in of pipelines in November.
In Africa’s biggest oil producing country, petroleum and associated products are transported through 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.
The NNPC report revealed that in the month of December alone, pipelines leading to eight loading terminals for crude exports suffered major leakages costing the country several millions of dollars in lost revenue.
The NNPC monthly report for December showed production in the month was cut back by shut-down of Bonny terminal and Trans Ramos Pipeline due to leakages at the Odimodi area and planned maintenance at Okoloma and Imor facilities, respectively.
“Production was also disrupted at Abo, Brass, Akpo, Qua Iboe, Usan, Tulja and Erha terminals due to maintenance, technical issues, flooding, leakages and system upgrade,” NNPC said.
Combined production shut-in from all the eight terminals in December was 5.1 million barrels worth, with a total value of US$295 million, using the average price of the international Brent crude, the benchmark for Nigerian crude oil which sold for an average price of $57.36 in December.
A breakdown of the various shut-ins showed that 2,730,000 barrels worth $156 million were lost when the Akpo terminal was shut down for 26 days due to “full field maintenance”, while another 1,299,000 barrels were lost on Usan terminal due to “north loop pigging scheduled downtime and also for maintenance activity over a period of 2 days and 13 days, respectively”.
Similarly, 340,000 barrels (worth $19 million) were lost on Brass terminal as Addax shut in production for four days due to operational constraints while the platform equally stopped delivery into Nigerian Agip Oil Company (NAOC) facility due to leakages in the whole of November.
In Qua Iboe terminal, there was a 12-day shutdown in Asabo & Ekpe field due to “Distributed Control System/Electronic Safety Shutdown System (ESSDS) upgrade”, which resulted in a loss of over 568,000 barrels (worth $32 million), while at the Abo terminal there was a plant statutory shutdown for maintenance activities for nine days resulting in another loss of 108,000 barrels (worth $6.1 million).
In Bonny terminal, there was a shutdown for two days due to leakages with loss of about 26,000bpd (worth $1.4 million), while another production shut-in of 16,000bpd for five days also occurred at the Okoloma and Imor facilities due to planned maintenance.
The Brass Creek and Trans Ramos Pipeline which had been shut down since 24 April, 2018 due to leaks in a creek crossing in the Odimodi area resulted in a loss of 35,000bpd of production into Forcados Terminal.
“The line remains shut all through the month of November and to date,” NNPC said in its December report.
At the Tulja terminal, there was closure of Okwuibome field for the 31 days in October due to flooding at Beneku flow station resulting in a shut-in of 22,000bpd (worth N1.2 million).
The combined $295 million loss to pipeline leakages also compares with just $265.15 million Nigeria received as export earnings in August, an indication that receipts from export earnings could be twice higher if leakages can be eliminated.
Further analysis into previous monthly reports of NNPC to show detailed records of pipeline vandalism proved abortive as previous reports were no longer available on the state-owned behemoth’s website.
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 $295 million (N106bn at US$/N359.58) loss is slightly lower than N111.26 billion transferred by the NNPC into the Federation Account in December, representing 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.
NNPC admitted that payments into the Federation Account were affected after adjusting crude and product losses and pipeline repairs and management cost incurred during the period.
NNPC pipelines suffered a total of 197 vandalised points in the 12 months between August 2017 and August 2018 fuelled mainly by crude oil theft and vandalism, with the corporation admitting that this incessant vandalism has put it at a disadvantaged competitive position.
Speaking to BusinessDay on the challenges the NNPC looks to be having with its leaking pipelines, Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), questioned why 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 by phone.
He advised the Federal Government to “deregulate the sector and commercialise the pipelines and allow it to operate on a tariff model which will further block leakages”.
“The allegation in the industry now is that the biggest beneficiaries of pipeline vandalism are the military’s Joint Task Force, which is very sad,” Henry said.
Ayodele Oni, energy partner at Bloomfield law practice, said the problem of pipeline vandalism is broad.
“When you have problem surrounding unemployment, corruption, poverty, neglect and lack of social infrastructure, this is what you get. Government needs to give the locals a sense of belonging like job opportunities, education, and infrastructure and stop giving money to local chiefs,” Oni told BusinessDay.
Oni said Nigeria is too dependent on pipeline and needs to develop an alternative transport system for easy movement of crude oil like the opportunity offered by a functional rail system which is what other countries are doing.
Last month, nonprofit US-based news agency The Associated Press reported that more than 50 people were missing after a leaking oil pipeline exploded and caused a stampede in southern Nigeria.
It quoted the Nembe Chiefs Council spokesman, Nengi James-Eriworio, as saying that the blast early Friday caused massive oil spillage in the Nembe Kingdom in Bayelsa State.
DIPO OLADEHINDE
