Pipeline vandalism and economic recession

• Nigeria loses N162b to sabotage

Oil and gas remained the mainstay of Nigeria’s economy, contributing about 90 per cent of the nation’s foreign exchange earnings and about 25 per cent of the Gross Domestic Products.

A significant proportion of the nation’s oil is produced onshore and subsequently transported by pipelines, which are now being destroyed by Niger Delta militants.

Industry experts listed the effects of pipeline vandalism to include huge economic losses from pipeline and plant shutdown, environmental pollution, fire outbreaks usually resulting in loss of lives.

Vandalism also leads to scarcity and shortage of petroleum products, as well as decrease in electricity supply with the attendant socio-economic problems.

In Nigeria, petroleum and associated products are transported through extensive network of pipelines that run across different locations throughout the country from remote to populated areas.

These pipelines are however, poorly secured, thereby making them targets of repetitive attacks by vandals and this has cut the country’s revenue from oil and gas by half.

For example, in the month of July alone, Nigerian Petroleum Development Company (NPDC) lost a substantial portion of crude oil estimated to be in excess of N27 billion to pipeline vandalism.

The country has so far lost over N162 billion to the shut-in of the pipeline, which took effects from February this year.

Specifically, a total of 3,213 vandalized points have been recorded between August 2015 and July 2016.

The Nigerian National Petroleum Corporation (NNPC) has attributed the loss to Force Majeure declared by Shell Petroleum Development Company (SPDC) as a result of vandalized 48-inch Forcados export line.

The corporation stated that the activities of pipeline vandals and oil thieves are taking heavy toll on operations of the oil and gas industry with over 500,000bpd lost as at May 2016.

“In June 2016, there was additional shut in of about 50,000bopd, as a result of sabotage/attack on the delivery pipelines to Escravos Terminal. At Forcados Terminal about 300,000bopd remained shut-in and cargoes were deferred until repairs are completed. The Force Majeure declared on 10th May 2016 for repair works on Nembe Creek Trunk Line (NCTL) and the resultant shut-in of about 275,000bopd subsists.

This however believed to be responsible for the present economic recession in the country.

Recently, Nigeria’s vice President, Prof Yemi Osinbajo blamed the country’s economic challenges on the effects of pipeline vandalism.

Osinbajo said: “One of the key reasons why we are in recession is the fact that we lost about 60 per cent of our revenue due to the vandalisation of the pipelines on the Niger/Delta and we lost almost 40 per cent of the gas. “I have a strong belief that by the grace of God, we will be able to resolve that. Once we are able to resolve that, we would at least be able to earn more revenue. If revenue grows up, it is an added advantage.”

NNPC said in the monthly financial report released last week that the degree of turbulence in the Nation’s oil and gas sector due to renewed militancy has grossly impacted on oil and gas production with its attendant consequences for the economy. “In July 2016 operations, about 311 vandalized points were recorded,” it said.

According to the corporation, poor country’s performance in oil and gas revenue in the month of July is attributable to upsurge in attack and sabotage of oil facilities in the Niger Delta. At Forcados Terminal alone about 300,000bopd were shut in since February 2016 following Force majeure declared by SPDC.

It noted that a number of crude oil liftings were deferred until the repair is completed. Other major terminal affected by the renewed spate of vandalism includes Bonny, Usan and Que Ibo terminals.

NNPC stated: “Incessant vandalism, crude and products theft have continued to destroy value and put NNPC at disadvantaged competitive position.

“Reduction in vandalism will indeed unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, improved refinery utilization due to increased crude oil feed from restored pipelines, and reduction of crude/product losses.”

“A total of 3,213 vandalized points have been recorded between August 2015 and July 2016. Therefore, crude and products losses have continued to cost NNPC and the Nation huge amount of money.

NNPC said that at 1.77 million barrels per day (mbopd), however was still 10.72 per cent lower than June, 2015 production (the second lowest in over two decades).

It noted that Nigerian crude oil grades, including Bonny Light, Forcados, Brass, and Qua Iboe, have been under periods of force majeure which had negatively impacted on 2.2mbopd 2016 National Budget.