Collapsed infrastructure & the pains of downstream operations

*Oil flow instrument.

*Oil flow valves.

27 September 2015, Lagos – NIGERIA has a pipeline network of about 5,120 kilometers, 22 loading depots and 19 pumping stations, yet it is facing challenges in the distribution of petroleum products.

These pipelines are aging as they were laid more than 40 years ago, following the discovery of oil in the late 50s. Apart from the fact that the pipelines were laid on the surface, based on industry’s standard then, they have become old and corroded.

The pipelines are now failing integrity test because of corrosion induced leaks, and vandalism, forcing the Directorate of Petroleum Resources (DPR) to abandon them.

The long-term effect of the poor state of the pipelines is the use of haulage system in the distribution of petroleum products. This has inflicted untold hardship on road users, especially in Lagos where tankers have taken over the roads, due to indiscriminate parking.

Apart from corrosion, the activities of vandals have made the pipeline and petroleum depots to be out of use, to the extent that there is no alternative to petroleum haulage business. Thousands of litres of petroleum products are lost on daily basis due to vandalism of the pipelines.

The Nigeria National Petroleum Corporation (NNPC), said recently that the country lost crude oil and other petroleum products valued at N59.597 billion to pipeline vandalism in 2014 alone.

The corporation in its Annual Statistical Bulletin for last year disclosed that pipeline vandalism increased by 4.54 per cent compared to the situation in the previous year.

It noted that 355,690 metric tonnes of petroleum products valued at N44.75 billion was lost during the period, in addition to 1.08 million barrels of crude oil valued at about N14.847b.

“A total of 3,732 line breaks was reported on NNPC pipelines out of which 3,700 was as a result of vandalism, while 32 cases were due to system deterioration, resulting in a loss of 355.69 thousand metric tonnes of petroleum products worth about N44.75b.

“Also 1.08 million barrels of crude oil worth about N14.847b was lost in the same period. There were 32 cases of fire incidents during the year under review,” it said.

Giving a breakdown of crude oil loss, the NNPC stated that the country lost 17,964 barrels of Bonny Light valued at N264.37m, while 586,776 barrels of Escravos Light valued at N8.636b was lost to pipeline vandalism in the period under review.

In addition, the activities of the pipeline vandals led to the loss of 341,566 barrels of Ughelli Blend valued at N5.027b while 62,499 barrels of Seplat blend valued at N919m was lost in 2014.

In the area of petroleum products loss, pipeline vandalism in the Port Harcourt network, led to the loss 7,460 metric tonnes of petroleum products valued at N958.72m; Warri lost 14,290 metric tonnes valued at N2.312b, while Mosimi lost 332,850 metric tonnes valued at N41.279b.

Also, the vandalisation of the pipeline network in Kaduna led to the loss of 1,080 metric tonnes of oil valued at N200.39million.
Also, United States Energy Information Administration (EIA) attributed failure in the downstream infrastructure to poor maintenance, aging pipelines and sabotage from oil theft.

According to EIA, the oil spill, the result of the combination of factors has caused land, air, and water pollution, severely affecting surrounding villages by decreasing fish stocks and contaminating water supplies and arable land.

“The Niger Delta region suffers from environmental damage caused by pipeline sabotage from oil theft and also spills from illegal refineries. Poorly maintained, aging pipelines have contributed to oil spills as old pipelines can rupture when they corrode.

Stakeholders posited that for any security measure deployed for pipeline protection to yield tangible results, host communities must have a sense of ownership towards pipelines that pass through their communities and as such, protect them.

They identified poverty, corruption and community conflict as some of the key drivers behind the menacing challenge, adding that strong application of extant security measures are required to guarantee assets and human security in the oil and gas industry.

General Manager, Technical, Pan Oceanic Oil Corporation, Toni Egboh Ezeukwu, said that Nigeria’s oil and gas industry must now deploy new technologies in building and laying pipelines to ensure safety of the pipelines, despite the cost.

According to him, doing so has become necessary given the harsh operational environment that oil and gas operators have to put up with in the country.

“When the existing pipelines were built many years ago the situation was different. Now the Niger Delta is volatile, so we need to move away from the old pipelines and replace them with new technology,” Ezeukwu said.

National Coordinator, National Coalition on Gas Flaring and Oil Spills in the Niger Delta, Edward Obi, said oil companies and communities cannot only be blamed for the challenges, stressing that government should find permanent solution to the menace from the tax it collects from the operating oil companies.

The secretary of Major Oil Marketers Association (MOMAN), Mr. Femi Olawore, who spoke in private capacity agreed to the fact that the down-stream infrastructure in the country had for many years collapsed. He said none of the 22 petroleum depots owned by the NNPC is functioning, so are the pipelines. To him, the pipelines should be commercialised by handing them over to a private company to manage and secured.

Out of the 22 depots owned by NNPC, almost all of them are not functioning. So are the pipelines. This is strange. The pipelines should be given to a private company to manage and secured so that anybody who wants to distribute products can pay. The private organisation should be allowed to collect money from people who want to use the pipelines for distribution of products. The company should be made to sign an MoU to manage and secure the pipelines. If the pipelines and depots are well managed and are made functional and effective more fuel can be moved per hour through the pipelines than through trucks. Pipeline is the best way to transfer petroleum products and it will eliminate trucks from the highways.

“Government should use from the taxes they collect to fix the problem. They cannot just be collecting the tax and blaming the companies and communities for the challenge,” he said.

Technical Manager, Platform Petroleum, Longfellow Atakele, harped on the need for a multi-stakeholder approach to the challenge, while emphasising that the Niger Delta should be developed to give the communities a sense of belonging.

The Directorate of Petroleum Resources (DPR) is of the opinion that there is need for more refineries to eliminate truck distribution of petroleum products.

According to Mr. George Eme-Ita of the Public Affairs Division at the DPR, the agency does not build infrastructure to support the downstream, but issues licences.

“If anyone is ready to build pipelines, for instance, they can come to the DPR for licences. We would grant the request of anybody, who meets our stipulated guidelines,” he said.

On the dearth of downstream infrastructure in the oil and gas industry, he said the situation was bad, adding: “if enough products were refined locally, there would be no need for tankers moving petroleum products on roads. If capacity is scaled up, it would reduce the shortage of the products and, perhaps, the need for transporting them from one location to another.”

However, he noted that the DPR, in line with the Federal Government directive, is broadening the scope and expanding the space for investment, either by indigenous players or internationals.
“About three months ago, we assembled stakeholders and introduced processes for developing a guideline for modular refineries, but very few people have indicated interest. It must be understood that establishing a refinery is not an everyday business; it is capital-intensive and requires huge investments.

We need investors. Since oil and gas is the leading sector in the economy, it requires investors; DPR doors are open. We welcome anybody, who wishes to inquire about the establishment of refineries, whether modular or otherwise.”

Oil and gas consultant, Yekini Adeboye, said the problem with the down stream sector is inadequate infrastructure.

“In Nigeria, there are pipelines for crude and refined products, but we don’t have a planned pipeline network for domestic distribution, and when there is no infrastructure on ground, the people would make use of available options.

The best means would have to be by road, which is why we are seeing tankers everywhere. The rail system of transportation would have been a better option, but it is not designed for that purpose. If the Petroleum Industry Bill (PIB) is passed, it would allow private participation. Then, some of the private stakeholders can even create proper network for domestic distribution, while some others would engage in pipeline management.

But what the government can do right now is to increase capacity and journey management; and also meet with stakeholders in road and traffic management like the Federal Road Safety Corps (FRSC), Vehicle Inspection Officers (VIO) to manage these issues and also improve performance.”

The Group Managing Director of NNPC, Dr. Emmanuel Kachikwu, said that government is now ready to eradicate oil theft and pipeline vandalism in the next eight months.

” I want to assure you that the new leadership of NNPC, with the support and cooperation of all stakeholders, is working very hard to eradicate oil theft and pipeline vandalism in the next eight months.”

The NNPC boss said the measure was part of efforts to enhance transparency and accountability in the oil and gas industry, to boost production capacity of the corporation.
*Roseline Okere, Temiloluwa Adeoye and Ikechukwu Onyewuch – Guardian

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