Concerns regarding petroleum theft and security in the nation have been voiced by the Federal Government and oil and gas companies, who note that increased operational costs have an impact on profit margins and the nation’s ability to fulfill its $10 per barrel production cost objective.
Speaking yesterday at the Association of Energy Correspondents of Nigeria‘s (NAEC) annual conference in Lagos, the stakeholders warned that theft of crude oil and security issues continue to threaten the fiscal environment, particularly in the upstream sector.
In the wake of the COVID-19 pandemic, the Group Chief Executive Officer of Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, had criticized the country’s high cost of production, claiming that the cost of producing crude oil in the country ranged from $15 to $17 per barrel and that some industry leaders, like Saudi Arabia, had production costs between $4 and $5 per barrel.
He had remarked that because of the volatility of the world crude oil market, those nations that produce at the lowest cost would continue to do so, while those with high production costs would find it difficult to compete with the rising prices.
Yesterday, Kyari reaffirmed that the Niger/Delta security challenges are the main reason for the country’s very low output, and he said that if the security problems are resolved, production will return to its previous level of 2.1 million barrels per day.
Despite the difficulties in oil production, Kyari claimed that over the past three weeks, the NNPCL has resolved disagreements with its partners by abiding by the rules set down in the Petroleum Industry Act (PIA).
Nevertheless, despite the fact that crude oil is currently selling for a premium, the nation has not been able to maximize the benefits because of subpar production, theft, and excessive subsidy expenditures.
Between January and July 2022, Nigeria’s oil production fell by 28 million barrels, endangering the Federal Government’s goal of N9.37 trillion in oil and gas revenue for the year.
Dr. Zainab Ahmed, Minister of Finance, Budget, and National Planning, recently presented the 2023–2035 Medium Term Expenditure Framework & Fiscal Strategy Paper, in which the Federal Government laid the blame for oil production shutdowns on pipeline vandalism, crude oil theft, and high gasoline subsidy costs.
Gbenga Komolafe, the chief executive officer of the Nigerian Upstream Petroleum Resources Commission (NUPRC), stated Tuesday that the problems with continuous production, including as widespread oil theft and destruction of vital equipment, still exist.
Komolafe, who was represented by Dr. Abel Nsa, noted that the Commission is creating a roadmap for addressing the security issues in the industry and that it is also coordinating with the highest ranking members of the Nigerian Security Forces to create a strong security framework that ensures the Government Security Forces (GSF) provide pipeline and asset security in order to allay the worries.
He added that initiatives are being made to encourage the adoption of Nodal surveillance technologies on the main trunk lines at each manifold for real-time loss detection, which will enable prompt and more proactive responses, as well as to compel the installation of tamper detection technologies as part of pipeline and related oil and gas production facility designs submitted to the Commission for approval.
Komolafe noted that the NUPRC’s engineering and facilities team will continue to enhance and encourage life extension of brownfield assets in order to extract more value from them in light of energy transition issues.
“All hope is not lost, given that the majority of estimates indicate that oil and gas will continue to play a large role in the world’s energy mix well into the year 2050. Utilizing our reserves would enable Nigeria to advance in empowering the populace as we prepare for the eventual switch to renewable energy sources. Because we are significant contributors to an effective and efficient transition to a carbon-neutral future, I, therefore, implore everyone to step up their efforts, he continued.
The conference’s chair, Mrs. Audrey Joe-Ezigbo, emphasized the necessity for the nation to utilize its gas resources, saying that Nigeria cannot afford to fall behind as energy becomes a more potent geopolitical tool.