UGO AMADI
Aside the N103.4 billion apparently spent on pipeline repairs and management in 2015, available data from the Nigerian National Petroleum Corporation (NNPC), shows that the Federal Government actually recorded crude oil and product losses of N57.71 billion to pipeline vandalism within the period in review.
Indeed, revelations by the NNPC have shown that the huge spending by government for the purpose of protecting Nigeria’s vital petroleum products’ pipelines seemed not to be having any positive effects on the security of the country’s oil and gas resources after all.
Due to the series of pipeline vandalism, Nigeria has suffered setbacks in meeting its gas obligation to Ghana and other West African countries through the West Africa Gas Pipeline Company.
NNPC also disclosed that a total of 2,832 vandalised points were recorded between February 2015 and January 2016. The country has also allegedly recorded over 400 breaches on pipelines between January and March.
The corporation said that a comprehensive reform of the pipeline security situation would unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, improved refinery utilisation following increased crude oil feed from restored pipelines, and reduction of crude oil and product losses.
It may be virtually impossible for the NNPC to operate its refineries, crude oil and products pipelines nationwide profitably, unless government takes drastic measures to eliminate all acts of pipeline vandalism.
This is coming in the light of a report titled “Report on Improving Local Refining Capacity in Nigeria”, prepared by the Managing Director, Matwims Consult Limited, Mark Tubotein, which reveals that the repeated repairs by Petroleum Pipelines and Marketing Company (PPMC) after each act of vandalism for several years calls to question the integrity of existing pipelines that are over 35 years in operation without adequate maintenance on them.
Tubotein noted that reports from the NNPC revealed that effective January to August 2015 alone, there were over 1,824 cases of line breaks on PPMC pipelines.
“The corporation at least, spends billions of naira each year to maintain and secure pipelines with the assistance of both security personnel and community personnel in the Niger Delta. With this level of financial expenditure on dilapidated pipelines coupled with low capacity utilisation of local refineries, there is no way the corporation can remain profitable”, he contended.
He said; “Since the transportation of products through pipelines cost less than the alternative modes, viz, rail, road and sea, providing marketing companies the access of pipelines for a reasonable fee is essential to protect the consumer interests. All product pipelines need to be treated as utilities and ‘common carrier principle’ made applicable to all of them. The tariff for the usage of pipelines may be fixed by the regulatory body such as Department of Petroleum Resources (DPR).”
Specifically, NNPC disclosed that a total of 2,832 vandalised points were recorded between February 2015 and January 2016. According to the corporation, the Mosimi pipeline recorded 103 breaks in February last year; 60 breaks in March; 101 breaks in April; 146 breaks in June; 78 in July; 79 in August; 44 in September; 66 in October; 57 in November; 93 in December; and in January this year, it recorded 59 breaks.
Further scrutiny of the data revealed that in January 2016 alone, Kaduna and Port Harcourt recorded 59 and 247 breaks respectively, while Warri recorded 32 incidents.
The government initially hired community members as guards, but then brought in the security personnel when there was no improvement with the local guards. Not even the intervention of the security personnel could stop the unrepentant vandals.
Daily champion learnt that NNPC had adopted a new strategy in 2011, reportedly signing pipeline protection contracts worth at least $39.5 million a year. Government had touted the deals as effective tools in the fight against oil theft, yet NNPC’s own data show pipeline losses actually went up after the new contracts started.
In the last five years, things only appeared to get worse. In the Niger Delta, as many as 5,280 oil wells are linked by 7,000 kilometres of pipelines and are vulnerable to attacks by organised gangs.
The NNPC said in its report that pipeline vandalism, refinery capacity utilisation which is below commercial threshold due to prolonged Turn Around Maintenance (TAM) issues, and products losses, had continued to cost the corporation huge amounts of money.
Despite the fact that the January 2016 claimable Pipeline Repairs/Management Cost and Crude and Product Losses due to vandalised pipelines is yet to be released by the NNPC, it is understood that the country has already recorded over 400 breaches on pipelines between January and March.
The corporation said that a comprehensive reform of the pipeline security situation would unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, improved refinery utilisation due to increased crude oil feed from restored pipelines, and reduction of crude oil and product losses.
The Minister of State for Petroleum, Dr. Emmanuel Kachikwu, had expressed the determination of the corporation to eradicate oil theft and pipeline vandalism in the next eight months.
“I want to assure you that the new leadership of NNPC, with the support and cooperation of all stakeholders, is working very hard to eradicate oil theft and pipeline vandalism in the next eight months,” he said.
The NNPC boss said the measure was part of efforts to enhance transparency and accountability in the oil and gas industry, to boost production capacity of the corporation.
According to him, oil theft and pipeline vandalism have greatly affected the revenue generation and image of Nigeria at the international arena.
“Oil theft has reduced our revenue generation and indeed affected the image of our country at the international community,” he said.
He disclosed that as part of ways to find a lasting solution to the lingering oil theft, NNPC would establish a company that would be saddled with the responsibility of securing pipelines in the country.
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