Militant attacks: Oil sector faces bleak future May

19 May 2016, Lagos -Already battered by the steep drop in global oil prices and a lack of regulatory certainty, the Nigerian oil and gas industry has taken a turn for the worse following the resurgence of attacks on infrastructure in the Niger Delta.

A worker inspect facilities on an upstream oil drilling platform at the Total oil platform at Amenem, 35 kilometers away from Port Harcourt in the Niger Delta.

A worker inspect facilities on an upstream oil drilling platform at the Total oil platform at Amenem, 35 kilometers from Port Harcourt in the Niger Delta.

In the past few years, a number of projects have been suspended by International Oil Companies because of the regulatory uncertainty occasioned by the delay in the passage of the Petroleum Industry Bill.

Coming at a time when oil companies are cutting capital budgets as a result of the price slump, industry experts say the growing security challenge will further drive down investment in the country.

Earlier this month, suspected militants used explosives to blow up the Okan platform, a collection facility for offshore oil and gas that feeds the Escravos terminal in southern Nigeria. Also, a pipeline transporting crude oil to Warri refinery and a 16-inch gas line, owned by the Nigerian National Petroleum Corporation, were blown up.

The sabotage of the facilities came two months after a pipeline transporting crude to Shell’s Forcados export terminal was vandalised, forcing the oil major to shut down the platform and halt exports of the grade.

Chevron said the damage to the Okan platform had affected about 35,000 barrels per day of its own net crude production, or about 15 per cent of its output in the country.

Onshore oil assets in Nigeria have been attacked for years, forcing IOCs to reduce their land-bound operations in the area in favour of more secure offshore projects. But the latest attack shows that offshore facilities also are vulnerable.

The Chairman of the Trade Union Congress, Rivers State Chapter, Mr. Chika Onuegbu, said, “The attacks are coming at a very bad time. Oil price has gone down seriously. Secondly, oil companies are having a lot of issues; the Federal Government is owing them some $5bn in cash call arrears.

“The government’s funding of JVs has reduced considerably. The PIB has not been passed. We have issues in the downstream sector.

“We hope that the issue will not escalate beyond what it is now. It is not in the interest of the country or of the Niger Delta people because we have seen these IOCs actually divesting from the region, not because they do not want to continue to produce oil, but because they are worried about the safety of their people and assets.”

Onuegbu said the security challenge should be resolved to assure investors that the environment is safe for investment.

According to the EIA, the nation’s crude oil production, which peaked at 2.44 million barrels per day in 2005, fell to 1.9 million bpd last year. It began to decline significantly soon after as violence from militant groups surged, forcing many companies to withdraw staff and shut in production.

The Chief Executive Officer, Gacmork Nigeria Limited and ex-Chevron executive, Mr. Alex Neyin, said the recent attacks on Chevron’s facilities had put all the IOCs on alert mode.

He said, “All of the IOCs talk to themselves. When one gets hit, they go to OPTS (Oil Producers Trade Section), where all of them meet and discuss what is going on. And based on what is going on, sometimes they go on a common front and make a common decision. Everybody now will be trying to guide their back.”

Following the spate of attacks on oil and gas assets, Nigeria’s output of crude oil has declined to 1.4 million bpd from 2.2 million, according to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu.

 

 

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