Crude theft: How govt ramped up production to 2.1m bpd

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Stories by Adewale Sanyaolu

Last week’s disclosure by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Maikanti Baru, that the country is now producing as much as 2.1 million barrels of oil per day (bpd) from about 1.4 million bdp last year, rekindled hope among stakeholders that light seems to be at the end of the tunnel for operators in the oil and gas industry.

Baru, who made the disclosure at the 2017 Nigeria Oil and Gas (NOG) Conference and Exhibition, in Abuja, said the ongoing negotiations with stakeholders in the Niger Delta was responsible for the surge.

“A Crude production has steadily increased to 2.1 million bpd due to some strategic dialogue efforts embarked upon by the Federal Government in the Niger Delta,” Baru said. In his keynote address titled, “Outlining NNPC’s Commercial Strategy and Priorities”, Baru said industry challenges have subjected NNPC to seek alternative but optimal commercial strategies to meet stakeholder expectations.

Prior to the ongoing dialogue with agitators in the Niger Delta region, which seems to be yielding the desired result, the country was losing about 800,000bdp at the peak of militancy, forcing many International Oil Companies (IOCs) and indigenous operators to shut down operation in their respective locations. In Nigeria, petroleum and associated products are transported through extensive network of pipelines that run across different locations throughout the country from remote to densely populated areas.

These pipelines are, however, poorly secured thereby making them targets of repetitive attacks by vandals and this has cut the country’s revenue from oil and gas by half.

Economic impact of oil theft, vandalism

Vandalism leads to scarcity and shortage of petroleum products, as well as decreasing electricity supply with the attendant socio-economic problems. For instance, in July 2016, Nigerian Petroleum Development Company (NPDC) lost a substantial portion of crude oil estimated to be in excess of N27 billion to pipeline vandalism.

The country has so far lost over N162 billion to the shut-in of the pipeline, which took effect from February 2016. Specifically, a total of 3,213 vandalised points were recorded between August 2015 and July 2016.

NNPC had attributed the loss to Force Majeure declared by Shell Petroleum Development Company (SPDC) as a result of vandalised 48-inch Forcados export line.

The corporation stated that the activities of pipeline vandals and oil thieves are taking heavy toll on operations of the oil and gas industry with over 500,000bpd lost as at May 2016.

“In June 2016, there was additional shut-in of about 50,000bpd, as a result of sabotage/attack on the delivery pipelines to Escravos Terminal. At Forcados Terminal, about 300,000bpd remained shut-in and cargoes were deferred until repairs are completed.

Nigeria’s Acting President, Prof. Yemi Osinbajo, had blamed the country’s economic challenges on the effects of pipeline vandalism.

“One of the key reasons why we are in recession is the fact that we lost about 60 per cent of our revenue due to the vandalisation of the pipelines on the Niger Delta and we lost almost 40 per cent of the gas. “I have a strong belief that by the grace of God, we will be able to resolve that. Once we are able to resolve that, we would at least be able to earn more revenue. If revenue grows, it is an added advantage, he said.”

Past efforts

When Nigeria moved in security reinforcements to hunt the militants, British Foreign Minister, Philip Hammond, warned that the government needed to deal with the root causes of the conflict because a military confrontation could end in “disaster”.

Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, also echoed these sentiments when he told lawmakers that experience had shown that force alone tends not to solve problems. “There are going to be robust engagements on what could have happened to the contract or relationship that used to exist between the Niger Delta and the Nigerian Police that has suddenly resorted to sabotage,” the Minister said.

This was as President Muhammadu Buhari again extended a multi-million dollar amnesty signed with militants in 2009 but upset them by ending generous pipeline protection contracts.

“We are trying to look at the amnesty and what has happened. Policing is key, security issue and throwing economic palliative to those sectors are also key,” added Kachikwu.

He said the government was “trying to create funding mechanisms for some private investments, including funding mechanisms for some modular refineries” and “actually getting them involved in the security of the facilities.”

Current efforts

In a bid to halt hostilities in the Niger Delta region, President Buhari, met with Niger Delta stakeholders at the State House Abuja to resolve the crisis in the region, which had led to a sharp decline in oil production.

The meeting, held inside the Council Chambers of the Aso Rock Presidential Villa, Abuja, had in attendance Vice President Yemi Osinbajo, Secretary to the Government of the Federation, Babachir David Lawal, Chief of Staff to the President, Abba Kyari, as well as ministers and other appointees from of the Niger Delta origin.

Stakeholders from the region present at the meeting include Edwin Clark, the governors of Delta, Akwa Ibom, Bayelsa and Imo states as well as traditional rulers, service chiefs and heads of other security agencies were also in attendance. Kachikwu, in his presentation at the 2017 NOG, said government was determined to address the Niger Delta issues and build a peaceful and prosperous region, with emphasis on job creation for  the teeming unemployed youths, investment in infrastructure, energy and promotion of sustainable livelihood.   ‘‘We have been working closely with all relevant stakeholders including communities, state governors, government agencies, oil and gas companies to deploy a holistic developmental framework that will ensure lasting peace and sustained development in the region. This is our commitment, and this bond we are determined to achieve. 

“Part of the solution to the Niger Delta question is to take away infrastructure for oil and gas as a separate business. Government’s role is merely to facilitate a separate business that guarantees ease of access to all players, big and small.

“We have passed the stage where infrastructure development in Nigeria is done at the whim and caprice of indi-vidual producers. It now has to be a national infrastructure network for safe, easy and ef-ficient delivery of natural gas and crude oil to their destina-tions. So it has to be done urgently,” he stressed.

Stakeholders’ submission

Meanwhile the Managing Director, Shoreline Natural Resources, Mr. Ladi Bada, said shared responsibility is the way to go, adding that a multi-level stakeholder approach would help the sector get the desired result, rather than leaving all solution for government.

Chief Executive Officer, Oando Energy Resources Limited, Mr. Pade Durotoye, said it remained worrisome that security represents about 30 to 40 per cent cost in oil and gas operation, saying in other climes, only 1 per cent is spent on security.

He, however, advised that government should do more to protect oil and gas assets, especially as about 90 per cent of oil and gas operations are domiciled onshore.

Pipeline vandalism reduces by 20%

The Nigerian National Petroleum Corporation (NNPC) has said that its renewed efforts towards combating oil theft may have yielded the desired result as pipeline vandalism reduced to 20 percent as against the 58 percent reduction recorded last December.

Group Managing Director of NNPC, Mr. Maikanti Baru , stated this at the opening ceremony of the 2017 Nigerian Oil Gas (NOG) Conference in Abuja yesterday.

The GMD stated that the 20 percent reduction was achieved on a monthly basis.

He said the remarkable feat was as a result of ongoing stakeholder engagements in the Niger Delta, stressing that the operating environment has greatly improved compared to what obtained in the past.

‘‘We will continue to improve on our existing approach to engage stakeholders and indigenes in the Niger Delta region on the need to embrace peace and dialogue to move the country forward in a bid to shore up government’s revenue. This is an indication of friendly environment for business,’’ he said.

He lauded the initiative of the organisers of the event, CWC Group Limited, for bringing together an event of that magnitude despite the current travails in the nation’s oil and gas sector.

Recall that NNPC had in its December monthly report said that it recorded about 58 per cent reduction in cases of pipeline sabotage.

According to the report, only 18 cases of vandalized points on downstream pipelines were recorded in November 2016 as against 43 in the previous month. The downward trend in the cases of pipeline sabotage, according to the report, was due to sustained engagement with stakeholders by the Federal Government and the NNPC.

Lekoil  Otakikpo field targets 10,000bpd by year end

Lekoil, an oil and gas exploration development company with focus on West Africa, has announced plans to ramp up production to 10,000 barrels per day (bpd) by end of 2017 following commencement of continuous production from the Otakikpo Marginal Field (“Otakikpo”) in OML 11.

According to Lekoil’s Managing Director, Lekan Akinyanmi,  the 10,000bpd projection is sequel to the completion of a six-kilometer offshore pipeline leading from the storage tanks to the tanker offloading manifold at the Otakikpo field.

He added that all onshore facilities and the offshore pipeline have been fully commissioned and signed off by the regulators.

Otakikpo field is in the southern part of Oil Mining License 11 about 35 km east of the Bonny export terminal. The field is jointly developed by Green Energy International Ltd as the Operator and Lekoil as technical and financial partner.

“Lekoil is now a producing company.  I would again like to thank the entire team that has worked so hard on this project. They include our partners;   Green Energy,  investors and debt financiers,  host communities and  regulators for their continuing support.  The Otakikpo project began in a swamp location with no infrastructure and our team delivered production in less than two years with nearly 915,000 hours without any lost time injuries.  I am extremely proud of our people’s achievements,” he said.

Akinyanmi further stated that initial production (from the four production strings across both wells Otakikpo-002 and -003) is in line with company expectations.

 According to him, Initial production rates are 5,000 bopd, per current regulatory approvals for production commencement, adding that as is customary for a new field, the company will now focus on gathering production data and optimising well performance with regular exports underway.

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