Amid Massive Under-production, Nigeria Posts Record 9.4m Barrels Oil Loss to Shut-ins, Others

Emmanuel Addeh

Again, Nigeria has hit a new oil production loss record as a result of disruptions to its crude assets due to maintenance challenges, community issues and prolonged force majeure.

Latest data from the Nigerian National Petroleum Company Limited (NNPCL) indicated that in June, a whopping 9.425 million barrels were lost to the upstream challenges. This figure excludes the much-talked-about oil theft in the Niger Delta region, which is estimated to be 400,000 bpd.

The NNPCL has been unable to contribute a kobo to the Federation Account since this year, thereby crippling most dollar-related transactions in the Nigerian economy.

In a document in which the national oil company explained its operations to the Federation Account Allocation Committee (FAAC), it told the body that the nation lost the 9.425 million barrels during the month, in nine major incidents in the course of its operations.

Nigeria’s upstream petroleum sector has struggled in the last one year, due to deteriorating facilities occasioned by waning investment as well as oil theft, sabotage and community issues.

With an estimated oil price of about $110 for that month, it is estimated that the country may have lost as much as $1.036 billion to the phenomena during the period under review.

The Bonny terminal took the biggest hit during the period, with force majeure declared as a result of the shutdown of the terminal. The facility lost 3.545 million barrels during the month of June.

“Crude oil production at Bonny terminal has dropped significantly to an average of about 3mb since the 21st of March 2022 till date. The terminal operator has declared force majeure on all outstanding Bonny programme,” the NNPCL stated in the report.

During the month, the QUA IBOE terminal was also shut down for maintenance work, losing 2.056 million barrels, while production on Forcados was curtailed to the tune of 980,244 barrels as a result of the closure of the facility for pipeline repairs.

Nigeria, Africa’s largest oil producer and a member of the Organisation of Petroleum Exporting Countries (OPEC) has tried to stamp out sabotage on its pipeline network in recent years without much success.

Some operators have said they receive as little as 5 per cent of crude volumes pumped through the TNP pipeline, for instance, reflecting a larger issue for Nigeria which is already facing shrinking investment and hasn’t been able to meet its OPEC+ oil-production quota in order to benefit from a surge in prices.

But the loss of revenues to the Nigerian economy, according to THISDAY’s analysis, was further exacerbated by the decrease in production on the Ọdụdụ terminal with losses as high as 937,663 barrels.

The lack of drilling was due to maintenance repairs, while Jones Creek lost 809, 600 barrels as it was unable to restart due to workers’ protest on Oil Mining Lease (OML) 42.

Also, at the Bonga terminal, Nigeria lost 558,085 barrels because of flex work which was ongoing and required that the Floating Production Storage and Offloading (FPSO) facility be “kept at 16 meters draft to facilitate the repair work.”

Similarly, Brass was closed due a ruptured delivery line caused by sabotage, leading to the shedding of 315,000 barrels for the month, while Ukpokiti and Aje terminals lost 210,00 barrels and 11,000 barrels respectively due to a fire incident and maintenance work.

Not long ago, THISDAY reported that a combination of huge oil pipeline repair cost and high-level theft of crude oil was bleeding out the Nigerian economy, with losses amounting to at least $29 billion in the last six years, spanning between 2015 and 2021.

A review of the NNPCL’s latest data indicated that the company spent N8.352 billion during the month under review on pipelines security and maintenance.

The amount that the NNPCL spent in a month  is almost  the entire budgeted sum for the year for the purpose, which should be N8.792 billion for the 12 months of 2022.

However, the massive jump in security and maintenance costs may not be unconnected with the renewed moves by the authorities to rein in record oil theft in the Niger Delta.

The government recently deployed more troops to the region to curb the menace. On Saturday, Group Chief Executive Officer (GCEO) of the NNPCL, Mele Kyari announced cash rewards for anyone who blows the whistle on oil thieves and vandals, disclosing that he was personally spearheading the move to ensure that the identity of the whistle-blowers is kept under wraps.

He also announced that the NNPCL had deployed cameras to monitor its assets real time as well as the disclosure of the launch of an application to ensure the menace is brought to the barest minimum.

The GCEO stressed that many of the “illegal” refineries were being destroyed, but added that the major problem was the large-scale theft for export to neighbouring countries. He warned that Nigeria will soon begin to take action against countries which buy stolen crude from the country.

Latest OPEC data shows that Nigeria’s production quota fell to 1.083 million barrels per day in July. The country’s allocation for the month or how much it was supposed to supply to the global oil market was 1.8 million bpd.

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