28 August 2013, Abuja – Unmitigated oil theft, pipeline vandalism, uncertainty over the Petroleum Industry Bill, PIB, and the discovery of oil, shale oil and gas in commercial quantities are impediments that combine to reduce the country’s oil production.
It was learnt that the country’s oil production is gradually falling below the two million mark where the country was shortly before the introduction of the amnesty programme.
Nigeria is on the verge of losing its status as the largest oil producer on the continent to Angola.
The country’s challenges have largely been blamed for the upward price movement of crude oil above $100 per barrel.
Nigeria budgeted for oil sales of 2.5 million barrels per day in 2013 which, combined with the high petroleum prices, should have allowed for substantial savings in the Excess Crude Account. But instead of increasing, the fund has been run down from $9 billion in December to $5.1 billion in July.
Razia Khan, head of Africa research at Standard Chartered Bank, was quoted by Financial Standard of London as saying that the falling oil revenues should be a worry for the Nigerian government, especially with a presidential election scheduled for early 2015.
She observed that previous elections in Nigeria had been preceded by a sharp rise in spending and leakages in revenue collection as politicians increased spending for electioneering purposes, and the Independent National Electoral Commission, INEC, is expected to further contribute to depleting the national purse with elections.
Khan added: “Nigeria still has a comfortable current account surplus, but it is declining, as is the Excess Crude Account. Unless we see a turnaround in oil revenues, investors are going to start to get concerned.”
Nigeria drastically reduced oil workers’ kidnapping and pipeline bomb attacks in 2009 by persuading more than 26,000 militants to disarm in exchange for monthly cash payments and training, which are ongoing both within and outside the country.
While it is evident that the violence has not resurfaced, the menace of oil theft has grown into a vast and lucrative enterprise involving well-connected officials, security personnel and foreign collaborators.
An industry source said that oil theft may not end any time soon as those behind the menace were those that could end the proceeding.
His words: “The people behind oil theft are the multinational oil firms, politicians, military top brass and other powerful people. Can an ordinary man on the street embark on oil theft?”
Apart from oil theft, the proliferation of illegal refineries in the Niger Delta has also been identified as a portent tool that is sending negative signals to the multinationals on why they cannot risk future investment in the oil and gas sector in Nigeria.
Another source explained: “The issue of illegal refineries is linked with oil theft. Government attention is skewed towards looking outside as the sole source of encouragement for oil thieves. We are not looking at inside where Nigerians are being used to perpetrate this menace. Apart from the fact that some people see pipeline vandalism as their share of the proverbial national cake, multinational oil companies are also involved in the illegal refineries.”
It is estimated that more than 150,000 barrels of oil are reportedly stolen every day, with some feeding illegal refineries in the Niger Delta and the bulk shipped to destinations as far away as Asia.
There were earlier report of plan by government to look inwards to market its crude oil in the wake of the discovery of shale oil in the United States, U.S., and China. The discovery of oil in commercial quantities in countries such as Ghana, South Sudan and Mozambique, among other countries, may further exacerbate Nigeria’s worry.
Just in February this year, the U.S. imports from Nigeria dropped to 194,000 barrels per day, an 18-year low, forcing Nigeria to find new buyers.
Though Angola poses a challenge to Nigeria’s continued dominance as the continent’s leading oil producer, the fact remains that Nigeria’s 37.2 billion barrels of provable oil reserves are more than thrice that of Angola.
The dream of propelling Nigeria’s oil production to hit the four million mark has not been marched with action as government has done very little in making the dream become a reality.
Again, the uncertainty that has continued to trail the passage of the PIB and fiscal regime inherent in the bill coupled with the direction government is likely to chart post-PIB have caused oil majors to delay approving new projects.
This is manifested in the divesting of some International Oil Companies, IOCs, like Shell and Chevron, which have sold their assets to indigenous oil firms to concentrate more on deepwater blocks.
Government has repeatedly said the divestment of these oil majors is part of change in global oil business outlook.
– Collins Olayinka, The Guardian