Despite N350.4b annual security budget, oil facilities not safe

• Military, Elite Indicted In N15trillion Oil Theft
• Stolen Crude May Repay Half Of Nation’s $83.88b Total Debt, Finance 2020 Budget With Additional $8b For Mambilla Power Project
• Methods Of Oil Infrastructure Protection In Nigeria Expensive, Unsustainable – Jaiyeola
• Nwakolo Says Nigeria’s Obsolete Refineries, Weak Pipelines Aiding Theft, Bunkering

Though the Nigerian National Petroleum Corporation (NNPC) and some International Oil Companies (IOCs) operating in the country stake as much as N350.4b for staff and asset protecting yearly, the nation is still losing over N1.6t to oil and gas theft every year.

Indeed, stakeholders in the sector are pointing accusing fingers at the nation’s military and a network of politically exposed individuals as being behind the growing losses of crude and refined petroleum products estimated at $42b (N15t) in the past 10 years.

In terms of security, the NNPC is reportedly spending around N103.4b yearly to secure its asset across the country.

For staff and oil installation protection, most international oil companies operating in the country spend nothing less than $128m a year. A leaked internal document of Shell revealed that the oil company spent $383m over three years protecting staff and installations in the Niger delta region.

With this development, the five top oil companies in the country, Shell, Chevron, Agip and Total, ExxonMobil alone may be spending about $683m in a year, translating into around N247b yearly. With the spending by NNPC, the oil firms may be losing as much as N350.4b every year.

Not long ago, the Nigeria Extractive Industries Transparency Initiative (NEITI) said crude oil and refined products worth $41.9b have been stolen from Nigeria in the last 10 years.

It linked the development to the lack of fingerprinting technology, comprehensive metering infrastructure of all oil facilities, and other creative strategies necessary to combat the growing menace.

Considering that the current method of oil asset protection in the country, includes a coordinated strategy involving the Nigeria military, surveillance contracts championed by the Nigerian National Petroleum Corporation (NNPC), as well as the involvement of other related agencies, the stakeholders say failure to nip the brazen theft in the bud is capable of undermining the nation’s economic growth.

For instance, while the Navy, the Army and Nigeria Security and Civil Defence Corps (NSCDC) provide direct protection on land and water, NNPC among other contacts estimated that N9.3b currently awarded infrastructure surveillance contract to Ocean Marine Solutions for the protection of the strategic 87-kilometre Trans Forcados Pipeline (TFP).

An oil export line, the Forcados Oil Pipeline System is the second largest network in the Niger Delta, and transports oil, water and associated gas from fields to the Forcados Oil Terminal. The terminal has an oil export capacity of 400,000 barrel per day.

While Rivers State governor, Nyesom Wike, had revealed high ranking military officials were promoting oil theft in the Niger Delta region, the Executive Director of Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa, recently stated that the current reality remained an organised crime fuel by military and high-profile Nigerians.

“The depth of oil theft in the country is scandalous. Who is behind the theft? You have the military protecting the asset; there are powerful individual behind it, Musa said while condemning the loss of over $42b in recent time.

Decrying that the level of theft is higher than the total output of some oil countries, Rafsanjani also believe that the national corporation may be conniving in the crime.

Put in perspective, while Nigeria’s debt stock increased by 3.11 per cent from $81.27b recorded in the first quarter of 2019 to $83.88b (N25.70t) at the end of June 2019, the current estimated worth of crude and refined oil stolen from the current is capable of repaying almost half of the debt.

Considering that the proposed 2020 budget stands at $32b, the loses would have provided total funding for budget and additional $8b to finance projects like the Mambilla Hydro Electric Power Plant in Taraba State, expected to cost $5.792b.

If channeled into addressing infrastructure for instance, the current leakage is capable of providing almost twice the $31 billion needed yearly to bridge the gap in key infrastructure.  A study conducted by Mckinsey on Nigeria’s infrastructure requirement earlier this year shows that investment of over $31bn would be required yearly annually.

Like the case in other oil producing countries, for instance Saudi Arabia, where Nigeria had sent delegates to study their oil sector operations, PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, insisted that the current development calls for the use of technology in monitoring and operating the oil sector.

With growing security budget in Nigeria, standing at about  $6 trillion out of a total budget of $58 trillion between 2008 t0 2018, experts including Jaiyeola were of the opinion that the current model deployed to protect and operate the oil sector is not only outdated but unsustainable.

“Most National oil companies across the world are adopting technological advancement to monitor oil and gas facilities, tank farms and pipelines.  Drones, sensors etc are being used to identify areas prone to vandalisation, damage and wear & tear. This has to be the same in Nigeria and will be less expensive and more sustainable than the practice being adopted at the moment.

Team Lead (Research and Policy) Nextier SPD, Dr. Ndubuisi N. Nwokolo, noted that the nation’s oil industry is in serious need of overhauling, particularly refineries as well as crude and refined oil transportation pipelines.

“First, the oil industry needs more investment and this includes renewing our pipelines, the pipelines are old, especially the regions where you find that valves and have led to massive maintenance cost by NNPC.

“These old pipelines are not being renewed, expanded or even properly maintained, this is helping the both the illegal bunkering and oil theft in the country. There is no political will to expand the industry and make it more viable, we seem contented with what we are getting. NNPC are not just doing enough, and the massive corruption in the system leads to doubt about the nature and authenticity of the pipelines protection services awarded, he said.

Nwokolo called for a new industry agenda, which pushes for the signing of the Petroleum Industry Bill, attract investments in all stream of the industry, this will lead to a new vista that will include pipeline protections system with the oil communities as part of the whole oil industry improvement agenda.

Coming at a time when the country is facing dwindling revenues, NEITI had said paying priority attention to curb oil theft in the country’s oil and gas industry has become both necessary and urgent to expand revenue generation.

The report indicated that Nigeria loses an average of $11m daily which translates to $349m in a month and about $4.2b annually to crude and product losses arising from stealing, process lapses and pipeline vandalism.

“While figures from government put the loss at between 150,000-250,000 bpd, data from private studies estimate the figure to be between 200,000-400,000 bpd. This implies that Nigeria may be losing up to a fifth of its daily crude oil production to oil thieves and pipeline vandals”, the report said.

Weighing the implications of the development, Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju said unless urgently addressed, the situation may create significant headwinds for the nation’s weakened economy.

“This is occurring at several levels. First, it impacts negatively on federally collected revenue. Our budget is based on projected oil price and oil production. Theft reduces the volume of oil exports and government revenues. This impacts the ability of government at all levels to perform their fiscal responsibilities, including the level of public investments,” Adenikinju said.

While NNPC had planned to increase crude oil reserves by one billion barrels yearly, and bringing the reserves to 40 billion barrels by 2020, it earlier this year changed the projection to 2025. But with the rate of attacks, Adenikinju insisted that the projection could remain unrealistic.