As Oil Workers Brace for Nationwide Strike over Theft, Vandalism
Festus Akanbi writes that last week’s rally by the Petroleum and Natural Gas Senior Staff Association of Nigeria, where the union highlighted various issues including the severity of oil theft in the country, revenue losses, the frustration of oil companies operating nationwide as well as job losses by its members appears to be the needed push for the current administration to fast-track the process of ending the cycle of oil theft and pipeline vandalism in Nigeria
Last week, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) aroused the consciousness of the government and Nigerian people over the devastating effects of oil theft on the economy, warning that the nation may soon witness a crippling nationwide strike of oil workers amid the complaints that some oil firms are shutting down operations because of oil theft and pipeline vandalism.
The oil workers’ union, which staged rallies in Abuja, Kaduna, Lagos and Warri on Thursday, noted that apart from the fact that Nigeria can no longer meet its Organisation of Petroleum Exporting Countries (OPEC) quota, some oil companies are losing between 40,000 and 50,000 barrels per day and they have begun to exit Nigeria because they can no longer pay salaries of their workers.
PENGASSAN’s National President, Festus Osifo, who captured the frightening development said: “Today, the country is near comatose, it is almost on its knees because of oil theft.
“Companies are shutting production because they cannot produce and send into the pipelines because most of these products are stolen.
“Instead of them to keep producing, what is being done as of today is that the majority of our land operations are shut down because of oil theft.
“Some companies in the service sector are folding their operations because they cannot sustain the workforce anymore, they cannot pay salaries.”
Oil Companies Shutting Down Production
PENGASSAN’s President lamented that his members are losing their jobs at an alarming rate, disclosing that this is so because some of the major oil producers are finding it difficult to meet their obligations especially, payment of staff salaries.
He pointed out that Nigeria Agip Oil Company, for instance, has shut down production from land locations because the company said it cannot continuously produce and allow thieves to remove the entire product. Agip is not the only endangered oil company in Nigeria. Another troubled oil firm is Addax. According to Osifo, Addax has shut down OML 124 because it can no longer be sustained.
Osifo was quoted as saying that Total E & P is another example of an oil firm facing hard times in Nigeria. “For example in OML 58, there have been challenges in that location since January. “Initially, they shut down production completely but because the well also has associated gas, what happened at the end of the day is that they produced the crude oil, stored it in the tank and they reinjected it into the well. That means the oil that could have bettered the lives of Nigerians is sent back into the well.”
Osifo explained that SPDC is one of the worst hits as of today because they have shut down most of the land locations.
Justifying the rally, he said, “The reason we are doing this is that a lot of companies are shorting in production and when you short a single barrel you are shortshoot100. When you short 10, 0000 barrels you are shorting 10, 000 barrels multiplied by 100. If you do the math, that is about a million dollars every day. And some companies are shorting 40, 000 to 50, 000 barrels of crude oil per day.”
As the oil theft menace reached an all-time high, President Muhammed Buhari ordered the Chief of Defence Staff (CDS), General Lucky Irabor, to coordinate a process that will ensure both kinetic and non-kinetic interventions including engagements of communities, private contractors, and technology.
Through this effort, security officials have destroyed 959 metal tanks for storage purposes, 737 ovens, 452 dug-out pits, 355 cooking pots, and 179 wooden boats between April and August, this year.
They also recovered 35.8 million litres of crude, 22 million litres of diesel, 0.15 million litres of premium motor spirit, 0.76 million litres of kerosene, 207 pumping machines, 12 welding machines, two power generators, and two filling machines.
Analysts said it is difficult to nip the problem of oil theft in the bud because the body language of the government indicates that they don’t know the figures of barrels of oil being stolen daily. How can you fight a problem you cannot identify?
Last month, the Managing Director/Chief Executive of the Nigeria National Petroleum Corporation Limited, Mr. Mele Kyari, blamed various sections of the Nigerian society for being complicit in the theft of millions of barrels of crude oil, mentioning even that make-shift pipelines and stolen fuel have been found in churches and mosques.
Unfortunately, government officials cannot speak in unison on the exact volume of crude oil lost to theft and vandalism daily. What we have is a cycle of conflicting figures.
While some data from the Nigerian National Petroleum Company (NNPC) Limited showed that Nigeria was losing about 250,000 barrels of crude oil per day to theft, suggesting a total loss of about $1.5 billion, Kyari, addressing the 49th session of the State House briefing at the Presidential Villa in Abuja was quoted to have said that the country loses 700,000 barrels of crude oil daily to oil theft, a figure the military has faulted and denied.
On his part, the Minister of State for Petroleum Resources, Mr. Timipre Sylva, noted that the country loses 400,000 barrels of crude daily via oil theft. Sylva, who made the revelation during a recent visit to Governor Hope Uzodimma of Imo State in Owerri, regretted that the nation had fallen short of OPEC daily quota, from 1.8 million barrels to 1.4 million barrels, due to crude theft. He described the development as a “national emergency.”
However, a data analysis by Premium Times showed that between January and July, Nigeria lost an average of 437,000 barrels of oil a day to criminal entities and individuals who illicitly tap pipelines onshore and offshore in the Niger Delta region.
“At current prices, the stolen oil is worth more than $10 billion, which is equivalent to N4.3 trillion (at N430 to a dollar). This financial loss is more than 50 per cent of Nigeria’s external reserves. It is also more than double Nigeria’s total revenue between January and April, a period when Nigeria’s total oil revenue was unable to service its debt and the country had to borrow for everything else including payment of workers,” the report stated, adding that “Nigerian production fell in the first seven months of the year to about 1.1 million barrels a day of crude equivalent in July from over 1.4 million barrels in January, according to data obtained from the Organisation of the Petroleum Exporting Countries (OPEC).”
According to the report, in January, Nigeria was allocated 1.68million barrels by OPEC in a month when the country was only able to produce 1.41 million barrels per day. This amounts to a shortfall of about 270,000 barrels per day. With the price of crude at $85.24 in January, this shortfall translates to Nigeria losing a staggering $23 million daily.
In February, the figure went down to 1.37 million barrels per day against the OPEC quota of 1.7 million barrels per day, recording a shortfall of 328,000 barrels per day, which resulted in a loss of $30.81 million daily (at $93.95 OPEC basket price).
It was a double tragedy for Nigeria in March. First, the price of crude oil had jumped to $113 per barrel and OPEC had increased Nigeria’s quota to 1.71 million barrels per day. But sadly, Nigeria’s production had dropped to 1.34 million barrels, a daily shortfall of 378,000. This means the country was also losing $42.8 million worth of revenue daily.
Although oil prices dropped to $105 in April, OPEC still increased Nigeria’s required production to 1.73 million barrels per day. Unfortunately, this opportunity could not be converted to gains as Nigeria was able to produce 1.32 million barrels.
According to the Premium Times report, with some companies shutting production in May, Nigeria’s output further dropped to 1.23 million barrels per day compared to the average OPEC quota of 1.75 million. This amounts to a shortfall of 520,000 barrels per day. It also translates to a loss of $59 million in daily revenue since the oil price increased to $113 per barrel in May.
In June when the price was $118 per barrel, Nigeria’s production had fallen to 1.23 million barrels per day compared to OPEC’s required production of 1.77 million.
For the seventh consecutive month, Nigeria’s output witnessed a sharp drop in July. Total production was 1.18 million barrels per day against OPEC’s 1.79 million barrels quota.
Observers said it is a paradox that Nigeria which is in dire need of funds for its budget and capital projects appears helpless as saboteurs, including government officials, are making a kill of the lapses in the process of monitoring crude oil production in the country.
The government have explained how the economic sabotage is pushing Nigeria to the financial brink. It is also the reason for NNPC’s inability to remit oil sales receipts to the central bank in the last six months.
Financial analysts said the $10 billion in revenue, which was said to have been lost to theft and vandalism would have saved the country, especially in recent times when the nation suffers from an empty treasury and rapid decline.
This is why many see the threat by members of PENGASSAN as a wake-up call on the federal government to take decisive steps to tackle and end the menace.