COVID-19 Has Devastated The Nigerian Oil Industry – Sylva
…flies scorecard, regrets that pandemic is holding up his mandate.
Nigeria’s Minister of state, Chief Timipreye Sylva has declared that the COVID-19 pandemic has brought so much devastation to the Nigerian economy.
The minister, who spoke to Premium Times, said that the pandemic has brought the world economy to its knees, and “the Nigerian economy is currently lying flat on its stomach.”
He said that at inception, his ministry was mandated in eight forms: to curb crude oil theft and smuggling; completion of the gas flares commercialization programme; increase of crude oil production to 3mbpd; reduction of cost of crude oil production by 5%; passage of the PIB; promotion of inland basin and deep-water exploration; private sector collaboration to increase domestic refining capacity, and creating jobs and opportunities.
On crude oil theft, the minister said that losses are no longer from the oil terminals. “All the crude oil thefts recorded are before the crude oil arrives at the terminals, especially the land based terminals,” he said, explaining that crude oil theft happen via the pipeline system, which crisscross the mangroves and forests in Nigeria.
The ministry under his watch has been able to eliminate completely losses from the terminals. “So, the 60 to 100,000 barrels that we lose sometimes are usually from the pipeline system.” The NNPC (Nigerian National Petroleum Corporation) launched “Project White” which, he said, brought down the country’s daily petrol consumption from over 62 million litres to 52 million litres per day.
He also informed that the Department of Petroleum Resources (DPR) launched COLTS (crude oil lifting and tracking system), which tracked all the crude oil being exported from Nigeria. He revealed however that the barging system, when permits were given to companies, recorded no losses. But Sylva pointed that barging was very expensive, and contained too many layers, and therefore unsustainable.
On the 19th of March, we completely deregulated the petroleum products supply system. We took out subsidies, even on PMS (premium motor spirit). But, I see some kind of paradox here.
He said the stoppage of smuggling of petroleum products through the borders, and the removal of oil subsidies, has thrown up fresh challenges. “I foresee a situation where we might be encouraging the development of markets even outside our borders. Now, NNPC is no longer bearing the burden of subsidy payment,” the minister said
He said gas flares commercialisation programme is progressing steadily. About 200 companies were pre-qualified to participate, and so far the government has released about 45 gas sites. The companies have not been able to visit the sites for assessment due to Covid19 crisis. Some of the companies, he stressed, were supposed to have taken final investment decisions on their projects in June but have been held back by Covid19.
He said the President Muhammadu Buhari administration is proud that the Nigeria LNG Train 7 has taken off completely. “Few days ago, shareholders released the EPC (engineering, procurement contracts) and the FID taken to show that Train 7 has taken off completely. This is something everyone is proud of,” the minister said
On the CNG (compressed natural gas) and LPG (liquefied petroleum gas) penetration programme, he said the Nigerian government is trying to get Nigerians to use CNG and LPG (otherwise called cooking gas) more. He regretted that Nigeria has one of the lowest LPG penetration, even in Africa. “Even Niger Republic has a higher LPG penetration than Nigeria.”
Government, he said, is creating more jobs by making access to LPG cheaper. Sylva noted that until now many households could not use gas because of the initial high capital outlay for use to the ordinary man, which includes the acquisition of gas cylinder.
The minister said government is very worried that the cost of crude oil production is still very high in Nigeria. “It is not sustainable to have a situation where our average cost per barrel is around $30 per barrel. COVID 19 has taught everybody that we cannot continue like this.
“NNPC is doing very well in this regard. They are looking deeper into the budgets of operating companies. Before now, NAPIMS (National Petroleum Investment Management Services) had completely abdicated its responsibility of auditing the cost of production with the joint venture companies and became the contracting agency.
But, under the current leadership of the GMD (Group Managing Director), NAPIMS is now deeply more to its responsibility. And we are beginning to see a lot more compliance in the area of auditing of the accounts of the JVCs,” he said. He also faulted the contracting cycle, which he said led to higher costs of projects, and by extension, higher cost per barrel.
“But, now our regulatory agencies and bodies are living up to their billing by shortening approvals and contracting cycles as a result bringing down the cost of projects. We will begin to see soon a reduction in the cost per barrel. NCDMB (Nigerian Content Development Monitoring Board), NNPC, DPR are involved very largely in this,” the minister said
On the controversial Petroleum Industry Bill (PIB), the minister said the federal is almost ready with it. “The general structure of the Bill is ready. What remains is for the Bill to be discussed with the Minister, who is the President, and presented to the Executive Council of the Federation. It is largely work in progress. Things can still change after the discussions with the President and FEC,” he said
On the mandate to increase production to 3 million barrels per day, he complained again that the current COVID-19 crisis has not done the county very well these past few months. The pandemic, he said, wiped out demand for oil, forcing crude oil prices down so badly. The only way OPEC can react to it was to agree on very unprecedented cuts, which has affected the country’s ability to ramp up its oil production.
Looking ahead, the minister said Nigeria has its eyes fixed, for instance, on the Bonga South-West Project, which is going to add a significant number of barrels to our production. There is also the marginal field programme, which is expected to add significant number of barrels to the country’s production
After the passage of the PIB, the ministry will have a major bid round, which is also expected to increase production.
Chief Sylva said a commercial discovery in the country’s inland basin has been announced in Bauchi and Gombe states. “With the PIFB, there will be a lot more investment in the deep offshore hopefully. As I said earlier, work is at an advanced stage on Bonga South-West.”
He hinted that there are a lot of modular refineries the government is working with, adding that soon a lot of them will come on stream. According to him, Port Harcourt Refinery would have started by now if not also for COVID19.
On job creation, the minister said the construction of NLNG Train 7 alone will create 12,000 direct jobs at the construction phase, in addition to numerous indirect jobs. The CNG/LPG programme will create at least a million jobs in the short term, and many more million jobs in the longer term. The foundry will take about 5,000.
NNPC and a few other marketers have also agreed to install Compressed Natural Gas pumps in their filling stations across the country. If the consumer finds the price of petrol to be expensive due to the removal of subsidy, he has an alternative. “If he wants to continue driving on petrol, that’s his choice,” he said.
~ Chibisi Ohakah, Abuja