Nigeria – NNPC: Crude Oil Output to Rise on Pipeline Repairs

By Chineme Okafor

In an apparent effort to douse concerns over rising crude oil theft in the Niger Delta, the Nigerian National Petroleum Corporation (NNPC) has promised that the average daily production of crude oil will rise to about 2.5 million barrels per day (mbpd) in two weeks, following repairs on the Nembe Creek Trunk Line (NCTL).

NNPC’s position, however, contradicts that of independent sources in the oil industry, who informed THISDAY that the country was only producing 1.9mbpd, based on accruable revenue, and when an extra 140,000bpd is added from the NCTL, total output would stand at 2.04mbpd.

The differential between NNPC’s figures and those of independent sources has been blamed on incessant crude oil theft and pipeline vandalism, which is costing Nigeria an estimated 400,000bpd.

NNPC stated Tuesday that the expected completion of repair works on the NCTL, which has a daily capacity of 150,000bpd, would increase daily average crude oil production to 2.50mbpd, thus exceeding the target of 2.48mbpd.

The corporation explained that efforts exerted by the federal government through the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, to stem the tide of oil theft and pipeline vandalism were yielding positive results, contrary to the perception that the oil and gas industry is heading for extinction as a result of crude oil theft.

The corporation said in a statement from its acting Group General Manager, Public Affairs Division in Abuja, Ms. Tumini Green, that the combined efforts of Alison-Madueke, NNPC and IOCs to stem the crude theft menace have resulted in a significant drop in the level of pipeline vandalism and crude oil theft, thus resulting in a corresponding increase in crude oil production.

Green said in the statement: “Suffice it to say some vandalised pipelines and flow stations have been repaired and reopened such that average current national daily production stands at 2.4mbpd compared to the average year to date figure of 2.13mbpd as at June 2013.”

Attributing its current success to the directive by Alison-Madueke to NNPC to constitute an industry-wide committee on security strategy against crude oil and product theft, Tumini said the committee’s members included representatives from NNPC, all the IOCs, Nigerian Petroleum Development Company (NPDC), security agencies, as well as the Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce and Industry (LCCI).

She said: “In a fortnight, repair works on the Nembe Creek Trunk Line (NCTL), which has a daily capacity of 150,000bpd, is expected to be fully completed.

“On completion, daily average crude oil production is expected to increase to 2.50mbpd which will exceed the national daily target of 2.48mbpd.”

She noted that the corporation was determined to sustain the security measures initiated by the security agents against crude oil theft and pipeline vandalism.

“Our expectation is to increase production from the 2.48 to 2.55mbpd (both crude oil and condensates) for the rest of the year.
“We have the capacity and potential to maintain production above 2.55mbpd in the country. All that is required is to continue the fight against pipeline vandalism and crude oil theft to achieve this target.

“This will increase our 2013 average production to about 2.34mbpd if the current fight against pipeline vandalism and crude oil theft is sustained,” the NNPC spokesperson added.
Taking on the issue that the divestment by some multinational oil firms operating in the Niger Delta was as a result of the harsh operating environment and absence of leadership in the oil industry, NNPC described the argument as defective and rooted on weak logic syllogism.

It said mergers, acquisitions and divestments (MAD) is a global portfolio management strategy employed by mostly big corporations to restructure and reposition companies for better and efficient revenue growth and competition, and wondered why anybody could canvass such position when the multinational oil companies themselves, especially Shell, have repeatedly stated that part of the reasons for divestment of its assets was a deliberate measure to encourage and promote indigenous participation in the upstream oil and gas industry.

She said: “Against this backdrop, it is misleading to relate the strategic divestments as due to the absence of leadership in the oil industry.

“These divestments have in fact increased indigenous participation which will in turn create new job opportunities, reduce capital flight, encourage capacity building and support gas-based industrialisation aspirations.”

NNPC’s statement, however, contradicts the position of the IOCs on their divestment strategy over the years, as they have been forced to scale down their onshore operations in the Niger Delta where they have suffered the most losses to theft and vandalism.

As a result, the IOCs are rechannelling new investments to offshore deep-water concessions, where they are less susceptible to incessant attacks.

With regards to claims by Shell that it lost $700 million in the second quarter of 2013 to crude oil theft and other disruptions in Nigeria, NNPC stated that the loss claims were not localised to Nigeria as reported.
“Shell’s acquisition of shale oil and gas assets in North America have also proven not to be good investments and as such programmed for divestment to minimise risk.

‚ÄúIn order to further buttress the global challenges, Shell’s current tight oil output is 50,000bpd as against an estimated 250,000bpd in the United States,‚Äù Tumini explained.

She said: ‚ÄúFurthermore, ExxonMobil’s Q2 2013 earnings were down substantially by 57 per cent year-on-year primarily due to prior year gains, Japanese restructuring and divestments.‚Äù
NNPC, in this regard, restated its determination to work with all stakeholders in the oil and gas industry to ensure effective management of the nation’s vast hydrocarbon resource base.

The corporation, however, remained silent on what efforts were being made by the Ministry of Petroleum Resources to implement the recommendations of the Nuhu Ribadu report of the Petroleum Revenue Task Force for the introduction of an automated metering system for the oil and gas sector.


Original Article