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Monday, November 24th, 2014

$6 Billion Lost Yearly To Crude Oil Theft In Nigeria, While Fiscal Crisis Looms

Lagos — Nigeria is on the verge of a major fiscal crisis following unabated massive theft of crude oil in the Niger Delta, THISDAY has learnt.

While all attention has been focused on the activities of Boko Haram in Northern Nigeria, an unprecedented theft of crude oil is being perpetrated in the Niger Delta on a daily basis.

Shell had recently warned that about $6 billion is lost yearly to crude oil theft. Two ships with 1.3 million barrels of stolen crude were recently arrested.

The latest case of sabotage was recorded by French oil major, Total.

A source at the Ministry of Petroleum told THISDAY at the weekend that the rising menace of crude theft, vandalism and illegal bunkering was responsible for the country’s shortfall in crude oil export.

According to the loading schedules obtained by THISDAY at the weekend, the country is currently exporting 1.85 million bpd of crude oil, representing a drop from the 1.87 million bpd loaded in March and the 1.96 million bpd projection for April.

Also, 610,000 barrels per day of condensates are being exported, bringing total exports to 2.46 million bpd, which is already below the budget target of 2.48 million bpd and the dangers are obvious if the figure is depleted further on account of theft and vandalism.

The country is currently losing 17 per cent of crude oil production to theft and this translates to one-fifth of the oil revenue, according to statistics obtained by THISDAY.

The resultant shortfall in the daily export target of crude oil has draining effect on revenue target of the Federal Government in the 2012.

“It is a real threat because the projected revenue profile based on daily crude production of 2.48 million bpd may not be realised and the budget will record huge deficit,” he said.

He noted that the 2.48 million bpd budget benchmark was on the top-end of actual production in 2011, adding that output shortfalls arising from crude theft, activities of vandals and operators of illegal refineries would force the government to borrow money to finance the huge deficit.

But the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Austen Oniwon, told THISDAY at the weekend that the Federal Government had put proper measures in place to curb the theft.

Oniwon said the country was doing well in terms of export as “the market is firm” but acknowledged that crude theft has become a major issue.

He however assured that government was addressing this challenge, citing last week’s arrest of 22 Ghanaians and four Nigerians with stolen crude, as dividends of government’s renewed efforts against crude oil thieves.

“Yes, crude theft is an issue but we are working to address the situation. Security agencies have beefed up security around oil facilities and I am aware that one of the governors has also set up a task force to work with us to address the problem. You will remember that last week, the security agencies arrested 22 Ghanaians and four Nigerians with 1.3 million barrels of crude and I know that some of you (journalists) went there. The arrest shows that government is working seriously to address the situation,” he said.

THISDAY gathered that President Goodluck Jonathan directed security agencies to beef up security to safeguard oil facilities against theft and vandalism.

It was also confirmed that the Governor of Bayelsa State, Chief Henry Dickson, has set up a task force to check the menace.

A security meeting, it was learnt, has also been scheduled this week between the NNPC and other stakeholders to map out ways of curbing the menace.

With the coming on stream of Total’s Usan deepwater field in February 24, 2012, it was projected that 1.96 million barrels per day of crude oil, translating to 70 export cargoes, excluding condensates, would be exported in April, against 1.87 million bpd or 65 cargoes that were loaded in March.

Also, owing to improvement in security in the Niger Delta, it was also projected that the country would export 380,000bpd of Qua Iboe grade of crude oil in April, compared to 368,000 bpd in March, while 163,000bpd of Bonny Light was to be loaded, compared to 156,000bpd exported in March.

But these targets were not met as Shell declared force majeure on export of Bonny Light due to crude oil theft from one of its main oil trunk lines in Nembe Creek in Bayelsa State.

With 600,000bpd condensates, the country’s export in April would have hit 2.56 million bpd, if the 1.96 million bpd crude oil project had been attained.

It was learnt that the 180,000bpd-capacity Usan offshore oilfield pumped almost 100,000 bpd in April, and is expected to load four to five cargoes per month, to hit 160,000 bpd this year, before it ramps up to full capacity.

The National Assembly recently passed a budget of N4,877, 209,156,933 for the 2012 fiscal year, after an upward review of oil benchmark of $70 per barrel proposed by President Jonathan to $72 per barrel to help reduce provision for deficit budget of N1.162 trillion by N98 billion.

The budget also includes N888 billion funding for oil subsidy program and additional N180 billion provided for Subsidy Re-investment Program (SURE).

The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi Lamido, had raised the alarm that the daily crude oil production figure in the budget was too optimistic.

“(The output) assumption was too optimistic… based on the most rosy forecasts of operating environment. When you have got militancy, you have got production shortages, you have got natural operational failures, a more conservative output figure to begin with would have been better,” he had said.

On the N888 billion for subsidy, Sanusi had said: “With oil prices where they have been since the beginning of the year I am sure that we will be exposed to that amount long before the year runs out”.

“If I was asked for advice I would simply say pay what you have in the budget and simply stop paying. (If not) They take the money from the excess crude account (or) you have got to borrow money,” he had added.

The Executive Vice President for Sub-Saharan Africa in Shell Exploration and Production Africa Limited, Mr. Ian Craig stated recently that 150,000 barrels of crude oil is stolen daily in the country.

Craig acknowledged that onshore, the amnesty program for militants has had a major impact as security had improved, but pointed out that his company’s production was still below pre-militancy levels.

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