Oil & Energy
CTA Tasks FG On Oil Theft, Pipeline Vandalism
The Center for Transparent Advocacy (CTA) has called on the Federal Government (FG) to be proactive if it hopes to end oil theft and pipeline vandalismin in the country.
Executive Director, CTA), Ms. Faith Nwadishi, who made the call, also stressed the need to be proactive in dealing with the menace, which has festered for too long.
“The Federal Government needs to commence speedy implementation of the host provisions in the Petroleum Industry Act (PIA) 2021 to curb the alarming incidences of crude oil theft and pipeline vandalism, which is costing the country loss of huge revenues”, she stated.
Nwadishi, who recently spoke with reporters, noted the devastating impact of crude oil theft and illegal refineries on Nigeria’s economy, which relies mainly on revenue from the oil and gas sector to fund its operations.
The 2020 Petroleum Industry Report released by NEITI, indicated that at least 39.16million barrels (mmbls) of crude, valued at N15.71bn as at then, was stolen, with an average loss of 107,293 barrels per day (bpd).
According to the report, Nigeria lost an estimated N15.71 billion worth of crude oil in 2020, N1.67 trillion in 2021, and just from January to April 2022, the country has lost N623 billion worth of crude.
“If we are having crude oil theft of up to over 90 per cent, it means also that we are losing revenue up to 90 per cent, and that is devastating for a country like Nigeria that relies so much on the revenue that it gets from the oil and gas sector, especially from the sales of crude oil.
“Unfortunately, this issue about crude theft had been going on for a very long time because the government didn’t take it seriously.
“I remember when I was on the Board of the Nigeria Extractive Industries Transparency and there was a study that was done, as at that time, it was reported at about four per cent of crude oil that was between 2013 and 2014.
“Then crude oil theft was about four per cent and only to be shocked, from official sources, that less than 10 years later we’re losing over 90 per cent. It means that as at the time that crude oil theft was at four per cent, the government was not doing anything about it even though security agencies funding for the protection of the infrastructure was increased,” she said.
Emphasising that Nigeria need to be proactive in the way the menace is handled, she continued that “luckily for us, we have the PIA that has been passed. There’s a component of the host community we need to as quickly as possible begin to implement.
“We need to reengage the community people on how to protect these pipelines in their neighborhood, because people have argued that the reason the crude is stolen is because the people have not gotten anything out of it,” she said.
Nwadishi, however, explained that beyond people in host communities stealing crude, there is connivance of the expertise of the professionals that know how this is done and the security agents.
“This is why the Federal Government needs to tighten security surveillance around the pipelines”, she said.
Speaking on the impact of illegal refineries on the lives of Nigerians Nwadishi said, “we can see now that even the illegal refining in the country is a dangerous venture. People have come out to say that you have these explosions from time to time, people die but unfortunately, we’ve got this one that claimed the lives of over 100 people.
“The reason people go into this is because of unemployment. People are not employed, you have an oil rich country, and unemployment rate is skyrocketing.
“You have young people who are graduates who can’t find jobs and so they join in this criminal gangs because it’s now a gang, it’s now something that people are so much involved in”.
The Federal Government has expressed optimism in attracting more investments by International Oil Companies (IOCs) into Nigeria to foster growth and sustainability in the energy sector.
This is as some IOCs, particularly Shell and TotalEnergies, had announced plans to divest some of their assets from the country.
Recall that Shell in January, 2024 had said it would sell the Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
According to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, increasing investments by IOCs as well as boosting crude production to enhancing Nigeria’s position as a leading player in the global energy market, are the key objectives of the Government.
Lokpobiri emphasized the Ministry’s willingness to collaborate with State Governments, particularly Bayelsa State, in advancing energy sector transformation efforts.
The Minister, who stressed the importance of cooperation in achieving shared goals said, “we are open to partnerships with Bayelsa State Government for mutual progress”.
In response to Governor Douye Diri’s appeal for Ministry intervention in restoring the Atala Oil Field belonging to Bayelsa State, the Minister assured prompt attention to the matter.
He said, “We will look into the issue promptly and ensure fairness and equity in addressing state concerns”.
Lokpobiri explained that the Bayelsa State Governor, Douyi Diri’s visit reaffirmed the commitment of both the Federal and State Government’s readiness to work together towards a sustainable, inclusive, and prosperous energy future for Nigeria.
While speaking, Governor Diri commended the Minister for his remarkable performance in revitalisng the nation’s energy sector.
The Federal Government has assured investors in the nation’s gas sector of the security and safety of their investments.
Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, gave the assurance while hosting top officials of Shanghai Huayi Energy Chemical Company Group of China (HUAYI) and China Road and Bridge Corporation, who are strategic investors in Brass Methanol and Gas Hub Project in Bayelsa State.
The Minister in a statement stressed that Nigeria was open for investments and investors, insisting that present and prospective foreign investors have no need to entertain fear on the safety of their investment.
Describing the Brass project as one critical project of the President Bola Tinubu-led administration, Ekpo said.
“The Federal Government is committed to developing Nigeria’s gas reserves through projects such as the Brass Methanol project, which presents an opportunity for the diversification of Nigeria’s economy.
“It is for this and other reasons that the project has been accorded the significant concessions (or support) that it enjoys from the government.
“Let me, therefore, assure you of the strong commitment of our government to the security and safety of yours and other investments as we have continually done for similar Chinese investments in Nigeria through the years”, he added.
Ekpo further tasked investors and contractors working on the project to double their efforts, saying, “I want to see this project running for the good of Nigeria and its investors”.
Earlier in his speech, Leader of the Chinese delegation, Mr Zheng Bi Jun, said the visit to the country was to carry out feasibility studies for investments in methanol projects.
On his part, the Managing Director of Brass Fertiliser and Petrochemical Ltd, Mr Ben Okoye, expressed optimism in partnering with genuine investors on the project.
Crude oil prices recently logged their second monthly gain in a row as OPEC+ extended their supply curb deal until the end of Q2 2024.
The gains have been considerable, with WTI adding about $7 per barrel over the month of February.
Yet a lot of analysts remain bearish about the commodity’s prospects. In fact, they believe that there is enough oil supply globally to keep Brent around $81 this year and WTI at some $76.50, according to a Reuters poll.
Yet, like last year in U.S. shale showed, there is always the possibility of a major surprise.
According to the respondents in that poll, what’s keeping prices tame is, first, the fact that the Red Sea crisis has not yet affected oil shipments in the region, thanks to alternative routes.
The second reason cited by the analysts is OPEC+ spare capacity, which has increased, thanks to the cuts.
“Spare capacity has reached a multi-year high, which will keep overall market sentiment under pressure over the coming months”, senior analyst, Florian Grunberger, told Reuters.
The perception of ample spare capacity is definitely one factor keeping traders and analysts bearish as they assume this capacity would be put into operation as soon as the market needs it. This may well be an incorrect assumption.
Saudi Arabia and OPEC have given multiple signs that they would only release more production if prices are to their liking, and if cuts are getting extended, then current prices are not to OPEC’s liking yet.
There is more, too. The Saudis, which are cutting the most and have the greatest spare capacity at around 3 million barrels daily right now, are acutely aware that the moment they release additional supply, prices will plunge.
Therefore, the chance of Saudi cuts being reversed anytime soon is pretty slim.
Then there is the U.S. oil production factor. Last year, analysts expected modest output additions from the shale patch because the rig count remained consistently lower than what it was during the strongest shale boom years.
That assumption proved wrong as drillers made substantial gains in well productivity that pushed total production to yet another record.
Perhaps a bit oddly, analysts are once again making a bold assumption for this year: that the productivity gains will continue at the same rate this year as well.
The Energy Information Administration disagrees. In its latest Short-Term Energy Outlook, the authority estimated that U.S. oil output had reached a record high of 13.3 million barrels daily that in January fell to 12.6 million bpd due to harsh winter weather.
For the rest of the year, however, the EIA has forecast a production level remaining around the December record, which will only be broken in February 2025.
Oil demand, meanwhile, will be growing. Wood Mackenzie recently predicted 2024 demand growth at 1.9 million barrels daily.
OPEC sees this year’s demand growth at 2.25 million barrels daily. The IEA is, as usual, the most modest in its expectations, seeing 2024 demand for oil grow by 1.2 million bpd.
With OPEC+ keeping a lid on production and U.S. production remaining largely flat on 2023, if the EIA is correct, a tightening of the supply situation is only a matter of time. Indeed, some are predicting that already.
Natural resource-focused investors Goehring and Rozencwajg recently released their latest market outlook, in which they warned that the oil market may already be in a structural deficit, to manifest later this year.
They also noted a change in the methodology that the EIA uses to estimate oil production, which may well have led to a serious overestimation of production growth.
The discrepancy between actual and reported production, Goehring and Rozencwajg said, could be so significant that the EIA may be estimating growth where there’s a production decline.
So, on the one hand, some pretty important assumptions are being made about demand, namely, that it will grow more slowly this year than it did last year.
This assumption is based on another one, by the way, and this is the assumption that EV sales will rise as strongly as they did last year, when they failed to make a dent in oil demand growth, and kill some oil demand.
On the other hand, there is the assumption that U.S. drillers will keep drilling like they did last year. What would motivate such a development is unclear, besides the expectation that Europe will take in even more U.S. crude this year than it already is.
This is a much safer assumption than the one about demand, by the way. And yet, there are indications from the U.S. oil industry that there will be no pumping at will this year. There will be more production discipline.
Predicting oil prices accurately, even over the shortest of periods, is as safe as flipping a coin. With the number of variables at play at any moment, accurate predictions are usually little more than a fluke, especially when perceptions play such an outsized role in price movements.
One thing is for sure, though. There may be surprises this year in oil.
lrina Slav
Slav writes for Oilprice.com.
