By Chibisi Ohakah, Abuja
A recurring feature in Nigeria’s oil and gas experience is the incidence of oil pipeline vandalism. It is a permanent title in the Nigeria National Petroleum Company Ltd (NNPC) Monthly Financial and Operations Reports.
Having increased in the last three decades, the incidence of pipeline vandalism, and the consequent oil theft, has caused enormous disruptions in the fortunes of major players in all the streams of the oil sector in Nigeria.
It is very important to state that the huge losses from pipeline vandalism, oil theft, cleanup and reparations, in addition to general insecurity which affects manpower and materials, are the major reasons multinationals are divesting from Nigeria.
Over time, Nigeria’s crude oil production has equally experienced disruptions on the back of noteworthy factors like community interference, industrial actions by oil workers, Covid-19 outbreak at terminals, among others.
Early this year, and following a breakage from TotalEnergies EP Nigeria Limited, in a letter to the Niger Delta Power Holding Company Limited (NDPHC), reflected the incessant occurrence of pipeline vandalism in Nigeria, as its NOPL pipeline (a 24 inch, 50km long pipeline under construction by TotalEnergies in a joint venture with the NNPC) got caught in the crossfire.
The Niger Delta Power Holding Company (NDPHC) said it had to shut down the Alaoji Power Plant located in Abia State over the vandalism recorded by TotalEnergies EP Nigeria Limited on the pipeline that supplies gas to the plant.
TotalEnergies had in a letter written to (NDPHC) declaring its decision to stop gas supply to Alaoji power plant due to the vandalism incidence on its NOPL Line at KP41 Alaoma Etche Cluster on January 7, 2022, following the pipeline vandalism.
The latest Alaoji/TotalEnergies case is a metaphor for the several cases of pipeline vandalism in Nigeria, causing massive oil theft and disruptions to oil and gas activities in the country in recent times.
A quick examination of the magnitude of disruptions experienced in the oil sector thus far can be seen in the numbers extracted from different previously released Federation Account reports from the crude oil marketing division of the NNPC in 2021.
The report disclosed crude oil leakages at the different terminals printed at 10.9mbbl, 14.8mbbl and 20.3mbbl in Q1-2021, Q2-2021 and Q3-2021, respectively, to give an aggregate of 46.0mbbl of crude oil volumes that were shut-in in the first three quarters of 2021.
These amounted to a total of N1.3tn cumulative loss in crude-oil production value, using $61.32/bbl, $69.08/bbl, $73.22/bbl average prices of Brent crude for Q1, Q2 and Q3-2021, at an official exchange rate of N411.95/$.
In 2022, the Nigerian national assumes oil production of 1.88mbpd at a benchmark price of $62.00/b. However, given security challenges in the oil sector, as well as underinvestment, Nigeria is unlikely to reach such lofty production levels.
Nonetheless, given the low base from 2021, we expect a modest improvement in oil production in 2022, as technical difficulties at oil fields get resolved.