A Review of the Nigerian Energy Industry

Nigeria’s oil production faces immense threat

Oil pipeline vandals increase tempo


30 January 2013, Sweetcrude, Warri – Nigeria’s record achievement of 2.6 million barrels of crude oil daily has come under immense threats as oil pipeline vandals appear set to resume operations with intensity due to the long recess they’ve been forced to embark upon since the government contracted ex-militants who know the creek better to embark on surveillance of all oil facilities in the Niger-Delta.

Recently it was reported that the country has lost about N170 billion to oil pipelines vandalism in the past, an anormaly that was checked when the Jonathan-led government contracted ex-militants to monitor these facilities as a follow through from the Yar’Adua amnesty programme.

The Pipelines and Products Marketing Company (PPMC), while reacting to our enquiries tried to put things in perspective. “The nation is losing huge amount of money to the spate of vandalism across the country, both on crude oil and refined petroleum products theft.

According to the PPMC, over N90 billion was lost to crude oil theft, against N10 billion lost to refined petroleum products stolen in 2011.
In 2012 alone, the loss incurred from crude oil theft through reduced to N42 billion, while products theft increased to N20 billion”.

Considering the huge damage on the lines, it was gathered that about N8 billion was spent to effect repairs on the lines between 2011 and 2012. This includes the expenditure on security and environmental integrity.

The recent attack on system 2b oil facility, one of Nigeria’s most strategic pipeline, running from Atlas cove, offshore Lagos up to Kwara state, is responsible for the epileptic supply of petrol across the country which has given rise to occasional vehicular queues at filling stations around Lagos, Abuja and other major cities in the country. Aside from this about 3 staff of PPMC were also killed in the attack on the facility by well trained and armed vandals.

Meanwhile, the Nigeria Security and Civil Defence Corps (NSCDC) said 1,283 suspected vandals had been arrested from early 2012 to January 2013. While this is true, not a few industry watchers and analysts dismissed this as a scratch on the surface as the real vandals are too sophisticated to be apprehended like mere criminals.

Speaking on the development Mr. Tamuno Green an engineer with an oil servicing company in Warri, Delta state said that a contract was signed by the federal government and some ex-militants for the purpose of intense surveillance of oil facilities in the Niger-Delta and afterwards there was sanity.

“Sometime in 2012 the President for whatever reasons thought it wise to engage the repentant militants in a more productive project of oil facility surveillance across the region and in Delta state for instance Oil Facility Surveillance Ltd was so contracted, and even if some of us criticized the rationale behind the President’s actions back then it later dawned on us that nothing could have been more effective as this people seem to know the creeks better than government uniformed agents and in most instances they even know those who carry out these acts and penetrate them so easily, hence before long the nation’s crude production began to rise! Not because new fields were discovered, after all there has been no licensing rounds since 2008 or thereabout, but we were as a nation able to ramp up 2.6 million daily crude production, that was due to the activities of these surveillance contractors, and now the government has refused to renew their contract hence the rise in activities of oil vandals.

This is because the people you refer to as vandals are not rag-tag or riffraffs, they are professionals, very enlightened and educated people engaged by highly unscrupulous elements with access to cash and ammunitions, and they are also following events. They are aware that there is no contract binding the surveillance companies of these dreaded ex-militants and the government, hence they should be able to unleash terror on oil facilities without interference, so I think the government should as a matter of national urgency renew the contract for these companies to continue their surveillance activities of oil facilities especially in the Niger-Delta, and this should not be politicized in any way in view of its strategic importance to national earnings and development.
It is so important because even the nation’s budget depends highly on oil production because it is mono-economy we’re operating here in Nigeria.”

Just a month ago, those of us operating in the sector were aware of the vessel arrested by officials of the Oil Facility Surveillance Ltd (MT Lady Jay) which was filled to the brim with illegally refined diesel (AGO) with a ten man crew. This arrest was carried out in the Escravos River, while both vessel and crew were handed over to the appropriate security agencies for further investigation, even without a contract in place as we are aware that the contract they had with government expired in February 2012,” he enthused.

Nigeria has about 15000 kilometers of oil pipeline, four refineries that are producing less than 145,000 barrels per day. With about 121 oil depots, the nation operates 62 jetties and about 25,000 fuel tankers hauling products across 24,500 filling stations across the country.

From the total of 24,500 filling stations, the major oil marketers have 2,471; independent marketers have 22,033, while the NNPC has 37 retail outlets.

Due to incessant vandalism, most of the pipelines are not functional, therefore posing serious threat to smooth distribution of products across these facilities.

Also it would be recalled that The Shell Petroleum Development Company of Nigeria Ltd (SPDC) had declared force majeure on outstanding cargoes of Bonny Light with effect from 4th May 2012. The action was blamed on production deferment caused by incessant crude oil theft and illegal bunkering on Nembe Creek Trunkline (NCTL).

Shutdown of the line for repairs resulted in a deferment of some 60,000bbls per day of production. The NCTL is the major conveyor of SPDC’s and third party production in Eastern operations to Bonny Terminal, and had to be replaced when the old one became weakened due to the installation of many crude theft points.

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