22 November 2014, Lagos – Rising cases of oil theft, production disruption and delay in the passage of the Petroleum Industry Bill have forced down the nation’s oil production targets.
In the 2013 budget, the country had targeted 2.53 million barrels per day, but the actual production that year averaged 2.2m bpd.
This year’s oil production target was set at 2.388 million bpd, but production so far averages two million bpd amid the spate of oil theft and pipeline vandalism.
For 2015, the government is projecting oil output of 2.278 million bpd, which is more than 100,000 bpd less than this year’s projection.
The Founder, Mak Mera Group, Mr. Mike Olorunfemi, in a telephone interview with our correspondent, said, “The truth of the matter is that crude oil theft is a big problem because it denies government of the revenue that would have accrued to them.”
He said insecurity had increased the cost of production in the country, adding that the theft of 200,000 to 300,000 bpd was robbing the government of revenue that could have been used to meet its cash obligations to oil companies. .
According to the United States Energy Information Administration, exploration activities are currently at their lowest level in a decade, with only three exploratory wells drilled in 2011 – in comparison with 20 wells drilled in 2005.
Olufemi said, “If you begin to look at what is happening right now, some international oil companies including Shell are selling their assets in the country. The so-called indigenous producers who are buying these assets don’t really have the money to put them into exploration and production. So now, our reserves base is declining. So when reserves are declining, you really cannot sustain an increase in the level of production.
“The policy measures on ground and what we are seeing do not correspond. We are not adding to reserves, therefore we are not in the position to increase production to the four million bpd target, simply because the level of funding by the government itself is declining.”
After averaging 2.3 million bpd in 2010 and 2.38m bpd in 2011, oil production declined to an average of 2.3m bpd in 2012 and just 2.2m bpd last year, according to FBN Capital’s Nigeria Macroeconomic Guide 2014.
The Chief Executive Officer, Gacmork Nigeria Limited, Mr. Alex Nexin, identified oil theft as one of the factors preventing the country from reaching the 2.5 million bpd quota from the Organisation of the Petroleum Exporting Countries.
He said, “If you have a quota of 2.5 million bpd and you cannot produce up to that, something is wrong somewhere. We have not been finding new wells in the past few years. So the addition to reserves is slow, while production keeps going on. The money we get from production, part of it should be used for exploration to increase our reserve base so that we reach that target.
“Among the things that are responsible for our inability to produce the 2.5m bpd quota are leakages in the system. Oil theft is still on. All those tankers offshore waiting for Nigerian crude, where is the crude coming from? So, these are leakages from the system. People are responsible for that. The Navy can come out to say they are fighting the oil theft. Yes they are, but it does not mean they are winning. This oil theft is a cartel. There are top people who are involved. So that is the problem.”
Supply disruptions last year had led to the closure of the Trans Niger Pipeline and the Nembe Creek Trunkline, and force majeure was declared on various crude grades.
“Oil theft as well as the delay in the passing of the Petroleum Industry Bill will keep Nigeria’s oil output and exploration activities below potential in the short term,” according to the FBN Capital report.
For 2014 oil production projection, the government applied a risk factor (production losses) of 300,000 bpd due to production shut-in resulting from activities of oil thieves and pipeline vandals in late 2012 and early 2013.
It, however, stated that the risk factors had been reduced to 150,000 bpd due to improved government efforts at tackling setbacks in the sector.
It further explained that the projected oil production figure for 2015 was lower than that of last year due to lack of new investments in the sector.
– The Punch