Nigeria Records 193m Barrels of Crude Oil Deficit With Rising Theft

Projected 1.86 million barrels daily oil production in the country’s 2021 budget, Nigeria recorded a huge deficit of almost 200 million barrels in the first 11 months of this year.

This was largely due to the rising cases of crude oil theft, ageing infrastructure, challenges associated with host communities, under investment, and poor security in the waterways.

Figures from the Nigerian Upstream Regulatory Petroleum Commission (NURPC), indicated that while Nigeria was expected to pump approximately 635 million barrels of oil by November this year, it struggled to produce only 441 million barrels in the period.

Many oil companies are reporting huge losses, sometimes up to 80 per cent of production in the pipelines. “When they pump through the pipelines, they only get about 20 per cent of product and the rest lost to pipeline breaches and organised theft. The 20 percent hardly covers cost of production,” an industry expert explained.

Some of the operators essentially, identified security as a core issue for the oil companies as product losses through the pipelines are now so massive that it is affecting their bottomline and the country’s revenue projection from crude oil export. Huge quantities of products are daily stolen by individuals and organised cartels of criminals.

The Navy and other security agencies that are supposed to protect the waterways and the companies’ operations are either looking the other way, or colluding with syndicates of oil criminals to steal this all-important national resource. It is now a huge and thriving business at the expense of the country.

This is part of the reason many major oil companies are divesting from the country. To prevent this huge losses to the oil companies, they have largely resorted to using barges to transport oil and the process of building barges and allowing their usage by the government is huge and cumbersome. The cost element to that is; it dramatically increases cost of production to these companies

This year has been a big disappointment for the industry in Nigeria in terms of matching production with market demand as efforts to meet its almost 1.7 million barrels per day allocation had produced little result.

Nigeria, going by the quota allocated by the Organisation of Petroleum Exporting Countries (OPEC), was expected to produce 1.683 million bpd in January 2022. However, meeting that target would be an uphill task as it has maintained an average of 1.25 million barrels in the last few months.

An analysis of the data from the regulatory commission indicated that aside its condensates production, which averaged 300,000 barrels daily, the country, through the Nigerian National Petroleum Company (NNPC) and its Joint Venture (JV) partners, pumped far below its forecast for the commodity for the period.

This was in contrast to last year, when the country was producing 1.7 million barrels per day on the average, except when OPEC compelled its members to cut their production in the heat of the COVID-19 pandemic.

Even then, NNPC and its partners pumped almost 1.4 million barrels daily, but that figure has slumped since the August 2021.

The NURPC data detailing crude production so far this year showed that the country only managed to pump 1.23 million barrels per day in August, 1.24 million barrels per day in September, 1.22 million barrels per day in October, and 1.27 million barrels per day in November.

On a monthly basis, the figures further revealed a decline from January as production was 42.1 million barrels for that month; in February it was 39.8 million barrels while in March, Nigeria pumped 44.2 million barrels, a relatively good month compared to the rest.

But April saw the country produce 41.1 million barrels; it was 41.6 million barrels in May; 39.4 million barrels in June; 41 million barrels in July, before it began a downward spiral till now.

In addition, 38.4 million barrels were pumped from around 30 Nigeria’s terminals and streams in August, 37.4 million barrels in September, 38 million barrels in October and 38.2 million barrels in November.

The unimpressive production figures have also negatively affected NNPC’s remittances to the federation account and by extension the monies shared by the federal, state and local governments this year.

For example with a paltry N10.54 billion in November, NNPC was only able to remit 8.5 per cent of its projected N122.7 billion to the Federation Account, a joint pool of funds shared by the country’s three tiers of government.

Aside April this year, when the national oil company paid in nothing into the federation account, the November remittance represented the second least payment for the year.

The information on the proceeds of the NNPC’s sales of crude oil and gas and subsequent contribution to the account was contained in its presentation to the Federation Account Allocation Committee (FAAC) for the month of December 2021.

Furthermore, the N10.5 billion represented a 29.1 per cent decline of the monthly contribution, which has steadily declined in the past three months due to a variety of factors, including under-production and petrol subsidy payments.

In addition, while a total of N2.30 trillion was supposed to have been paid to the federal, state and local governments in the first 11 months of 2021, only N522.2 billion had been paid as of November.

The NNPC data showed that the continuous deficit payment had so far resulted in a shortfall of N1.78 trillion in the current year.

However, the national oil company blamed the inability to restart the oil wells shut down in 2020 when OPEC compelled member countries to cut production for the declining production.

Added to that, it listed issues with host communities, vandalism, incessant force majeure on major assets, as well as technical issues leading to shutdowns.

Ageing upstream infrastructure due to years of under-investment remained a major headwind confronting the Nigerian oil and gas industry.

Meanwhile, a separate document released by the upstream commission showed that out of Nigeria’s 53 oilrigs, only 12 had been near active in the last few months, while 25 are on standby and 16 have been stacked.

In terms of terrain, of the 53 rigs, 33 are onshore, 11 are offshore, while nine were found in the swamps.

While a stacked rig means the ones which may or may not be operable, but which are stored and have no crews, an active rig count, is an official listing of operational oil and gas rigs in a certain area.

In the oil industry, the rig count is a major index of measuring activities in the upstream sector.

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