- FG mulls pipeline security force to protect oil and gas facilities
By Tobi Soniyi in Abuja and Ejiofor Alike in Lagos wit agency reports
The global deal between the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers on freezing crude oil output faces fresh hurdles with Saudi Arabia’s demand yesterday that Iran must join the agreement to end the glut in the oil market and stabilise prices.
The meeting between OPEC and non-OPEC producers ran into last-minute hitch in Doha, Quatar, yesterday due to what looked like a new spike in tension between Saudi Arabia and Iran.
Some 18 OPEC and non-OPEC countries, including Russia, met yesterday morning in the Qatari, to freeze output at January levels until October 2016.
But Reuters reported that the meeting was postponed after OPEC’s de facto leader, Saudi Arabia, told participants it wanted all OPEC members to take part in the freeze, according to OPEC sources.
OPEC is made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
Iran did not send a full delegation to the meeting, insisting it would not accept proposals to cap its production until it recovers a similar market share to what it held before United States-led sanctions were imposed on it over its nuclear programme.
The country, instead, sent its OPEC Governor, Hossein Kazempour Ardebilli, according to a report by Iran’s news agency, Shana.
Riyadh had earlier insisted on excluding Iran from the talks because Tehran had refused to stabilise production, seeking to regain market share after the lifting of Western sanctions against it in January.
However, a new draft of the agreement seen by Reuters thereafter contained none of the binding points of the previous outline.
The draft indicates that producers in and outside OPEC should agree to freeze oil production at “an agreeable level” as long as all OPEC countries and major exporting nations participated.
According to a draft copy of the agreement, the cap would last until October 1 this year, and producers would then meet again in Russia to review their progress in engineering what the document called “a progressive recovery of the oil market.”
No final agreement was reached on the draft. But speaking to journalists at the meeting yesterday, Kuwait’s acting Oil Minister, Anas Khalid al-Saleh, said he was confident a cap would be agreed.
Yesterday’s talks in Qatar would see OPEC – and unusually other producers – try to agree that the average daily crude oil production in the coming months would not exceed levels recorded in January.
A senior oil industry source said: “The problem now is to come up with something that excludes Iran, make the Saudis happy and doesn’t upset Russia.”
Failure to reach a global deal – the first in 15 years between OPEC and non-OPEC nations would signal the resumption of a battle for market share between key producers and likely halt a recent recovaery in prices.
Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to have refused to participate in the freeze.
Deputy Crown Prince, Mohammed bin Salman, told Bloomberg that the kingdom could quickly raise production and would restrain its output only if Iran agreed to a freeze.
Iran’s Oil Minister, Bijan Zanganeh, said on Saturday that OPEC and non-OPEC should simply accept the reality of Iran’s return to the oil market: “If Iran freezes its oil production … it cannot benefit from the lifting of sanctions.”
Meanwhile, VicePresident Yemi Osinbajo has said the federal government is considering establishing a permanent pipeline security force to stop vandals from damaging pipelines and other oil and gas installations across the country.
In a statement yesterday by his media aide, Mr. Laolu Akande, the vice-president spoke at the weekend when he visited the Forcados export terminal in Delta State on the instruction of President Muhammadu Buhari to assess the extent of damage to the facility.
Pipeline vandals attacked the a major Forcados pipeline last February, in the process, cutting off production of an estimated 250,000 barrels of crude oil per day (bpd). The damage to the pipeline has also led to a 50 per cent drop in electricity output, as gas supply to thermal power stations has been constrained since the pipeline was vandalised.
Osinbajo said Buhari was very concerned about the damage done to the pipeline in February and asked had him to visit and assess the situation which he said was responsible for the recent drop in electricity supply in the country.
The vice-president said: “There are efforts being made by the federal and state governments as well as communities to tackle current vandalism challenges,” adding that government was also looking beyond the present situation into what could be done in the future.
According to him, one of the future steps the Buhari administration could take to forestall vandalism is to establish a permanent pipeline security force.
He said such a force, if formed, “would be armed with sophisticated weapons to ensure we contain the vandalism and overhaul security.”
He said a permanent pipeline security force was an option to look at.
Concerned about both the loss of gas supply to power plants in the country and the significant loss of potential revenue arising from the damaged Forcados export terminal, Osinbajo called for the quick repair of the pipeline operated by Shell and the activation of an alternative process to ameliorate the gas supply deficit.
Osinbajo said the president called on Shell to speedily complete its gas development projects in order to increase domestic gas supply in the country.
Osinbajo who met with top officials of Shell and the Nigerian National Petroleum Coporation (NNPC) during the visit, told the officials that the destruction of the pipeline affects the Nigerian people and the economy.
“The damage done to Forcados affects not only our oil earnings but also as important is the power aspect. It (Forcados) is a major source of gas, about 40 per cent of our gas supply is affected leading to the problem of power supply in the country,” Osinbajo told Shell’s country Chairman, Mr. Osagie Okunbor and NNPC, Chief Operating Officer, Upstream, Mr. Bello Rabiu.
The vice president reminded them that power supply last January peaked at an unprecedented 5000MW, but has since dropped significantly including instances of system collapses, showing that this was a real problem.
While expressing satisfaction over the plans by Shell and NNPC to repair the pipeline, Osinabjo asked Shell to do whatever else could be done and do it as expeditiously as possible to repair the damaged pipeling.
A repair plan presented to the vice president during the visit by Shell indicated that the first phase of repair works was almost completed with expectations that the outstanding two phases would be concluded by May.
NNPC has also presented an interim alternative plan to supply gas to the power stations including trucking condensate.
Rabiu, however, conveyed the concern of the federal government that international oil companies (IOCs) that sit on up tp 80 per cent of gas deposits in the country have not been as forthcoming regarding gas supply to the domestic market.
“Even if it is as a matter of public service,” Osinbajo encouraged the IOCs to do a lot more to meet their domestic gas supply obligation, stressing: “We are clearly suffering in terms of domestic supply.”
He further stressed on the need for Shell to speedily complete the Bonga and Forcados/Yokri gas projects in order to assuage the plight of the Nigerian people.
According to him, “The president is particularly concerned about this outstanding gas projects.”
The Bonga Gas Diversion project would provide 120mmscf/d when completed by the second quarter of this year, while the Forcados/Yokri gas project would provide 80mmscf/d on completion expected at the same time. There is also the Assa North/Ohaji South project which can provide 500mmscf/d.
Experts say currently, gas supply to domestic market has fallen to 601million standard cubic feet per day (mmscf/d) from usual 1.1 billion standard cubic feet per day (bcf/d). The implication is that the country is now losing about half a billion cubic feet of gas a day, which roughly accounts for about 2000MW of electricity.
Also commenting, the Delta State Governor, Ifeanyi Okowa, who accompanied the vice-president all through the visit, lamented that “the Forcados terminal is important to Delta State and the nation”.
“That is where SPDC (Shell Petroleum Development Company) evacuates its crude oil and carries out other land operations including Seplat evacuating crude oil from there for export. Now all the production on land by SPDC has been hampered,” he said.