How militants’ attacks hurt oil, gas earnings

By Adewale Sanyaolu

A threat dismissed

When the Niger Delta Avengers (NDA), the new militant group operating in Nigeria’s oil rich region, gave oil companies two weeks’ ultimatum to shut down, many dismissed it as one of the regular threats they were used to.

But following the expira­tion of the two weeks’ ulti­matum, the impact is clear for all to see as most of the oil companies in the Niger Delta region have either shut down or scaled down operations while others have evacuated their workers to a safe haven, leaving the coun­try bleeding with a daily pro­duction of 900,000 barrels per day (bpd), according to statistics from analysts.

‘‘With damages to some oil companies’ operations over the past month, Nige­ria’s crude oil production had dropped to less than 1.5 million bpd and far short of the 2.2 million bpd assumed in the 2016 budget,’’ Min­ister of State for Petroleum Resources, Mr. Ibe Kachik­wu, had lamented.

Three weeks after the threat, the economy of the country was almost ground­ed to zero per cent as most oil installation facilities in the region have shut down operations.

The group had in an email sent to oil companies by its spokesperson, Col. Mudoch Agbinibo, said the attack on oil blocs would be bloody at the expiration of the ulti­matum. ‘‘To owners and op­erators of these oil blocs in our region, the Niger Delta Avengers is giving you two weeks’ ultimatum to shut down your operations and  evacuate your staff. If at the end of the ultimatum, you are still operating, we will blow up all the locations. It will be bloody. So just shut down your operations and leave,” the group whose strikes have devastated oil and gas opera­tions of major oil companies in the Niger Delta region and practically crippled crude oil production said.

Economic loss

Nigeria may have lost over N100 billion between February and June to the vandalised Forcados pipeline that conveys Forcados grade of crude oil of over 400,000 bpd.

The repair of the damaged pipeline, which currently cost Nigeria about 250,000 barrels of crude oil per day due to the bombing of Forca­dos pipeline, may last till June ending.

Though the Nigerian Na­tional Petroleum Corpora­tion (NNPC) targeted the repair to last for about eight weeks from the day of the attack, latest information shows that the repair may linger till the end of June.

Recall that the NNPC had announced a major loss in the month of April due to attacks on oil installations, leading to a N20 billion defi­cit owing to attacks on the Forcados export line by the NDA.

The situation, according to the Minister of State, Petro­leum Resources, Kachikwu, had adversely impacted the country’s 2016 production target of Nigerian Petroleum Development Company (NPDC) oil revenue.

NNPC said the persistent pipeline vandalism poses the greatest threat to the indus­try. In addition, the revenue from crude oil and gas was impacted by shut-down and shut-in of production for maintenances at different periods and terminals during the month under review.

Oil production suffered deficit of record 1.01 mil­lion bpd, raising the revenue losses by the country and International Oil Compa­nies (IOCs) to N10.1 billion ($50.5 million) daily.

Head of Energy Research at Ecobank, Dolapo Oni, said that crude production in Nigeria, hitherto the big­gest crude producer in Af­rica, has now dipped to about 990,000 bpd.

Oni, according to Reuters, said: “Between pipeline re­pairs and militant attacks, Ni­geria is probably producing no more than 990,000 bar­rels of oil everyday as against the 2.2 million daily produc­tion figure captured in the 2016 budget. That leaves the country with a deficit of 1.01 million bpd.

With crude price hover­ing around $50 per barrel, the losses in revenue on the 1.01 million barrels deficit amounted to N10.1 billion ($50.5 million) daily.

Also, Nigeria may lose ad­ditional $42 million (N8.3 billion) to the damage of 35,000 bpd Valve Platform, an offshore oil facility belong­ing to Chevron Nigeria Lim­ited located near Escravos in Warri South-west.

800,000bpd loss not sustainable

More worrisome is the re­cent revelation by Kachikwu at a special session of the House of Representatives convened over the recent petrol price hike that Nigeria was losing 800,000 barrels of oil per day due to pipeline vandalism, especially with the latest onslaught by NDA.

As at the last count, over 40 major pipelines have been bombed and destroyed across the Niger Delta by the militants’ group, NDA, as it pursues its avowed goal of crippling the country’s oil and gas industry.

Already, the combined effect of the successful at­tacks so far carried out by the group since February 10, when it bombed the Soku Gas Plant operated by Shell, which supplies gas to the Nigeria Liquefied Natural Gas (NLNG) plant in Bonny for export, has resulted in a precipitous drop in crude oil production and export by the major operating partners of the NNPC.

He condemned the inces­sant attacks on oil installa­tions in the country, saying, “we declined from 2.2 mil­lion barrels which was the fo­cus of the 2016 budget to 1.4 million barrels as of today.”

He, however, expressed the Ministry’s commitment to ensuring that destroyed facilities are repaired and ef­fectively protected. “We are going to work hard to see how we will get these issues resolved and get our produc­tion back.’’

Managing Director and Country Chair, Shell Com­panies in Nigeria, Mr. Osa­gie Okunbor, said at a recent meeting with Energy Editors in Lagos that nowhere in the world do some set of people take up and destroy national assets.

“Crude theft, illegal refin­ing and insecurity were key challenges in 2015. We are constantly monitoring the security situation in our oper­ating areas in the Niger Delta and are taking all possible steps to ensure safety of staff and contractors,” Okunbor had said.
Sun News