Nigeria Lost N3.8tn to Oil Theft in Two Years, Says NNRC Report

*NNPC, partners to take FID on $10bn Bonga South West oilfield in 2019

Ejiofor Alike with agency reports in Lagos and Chineme Okafor in Abuja

The Nigeria Natural Resource Charter (NNRC) Tuesday disclosed that its latest report on crude oil theft in Nigeria showed the country lost about N3.8 trillion within the last two years – 2016 and 2017 to the menace.

The UK-funded non-governmental organisation (NGO) also added that the estimated financial value of what Nigeria lost through crude oil theft in the Niger Delta was higher than the current combined allocations of the country to health and education in the 2018 federal budget.

This revelation is coming as the Nigerian National Petroleum Corporation (NNPC), Shell Nigeria Exploration and Production Company (SNEPCo), ExxonMobil, Total and the other partners will take the Final Investment Decision (FID) on the development of the $10 billion Bonga South West/Aparo (BSWA) deepwater project in 2019, THISDAY has learnt.

NNRC provides policy options to guide government and societies in their use of natural resources to ensure maximum and sustainable returns for citizens.

It said: “The combined allocations for health and education amount to N189.4 billion, which translates to a mere 8.4 per cent of the estimated value of losses from oil theft two years ago.”

The ‘NNRC’s Oil Theft in Nigeria’ report identified poverty, unemployment, poor governance, pervasive corruption and the neglect of the Niger Delta region as major reasons for the emergence and sustenance of oil theft over time.

According to it, in 2016, both government and oil companies indicated that a combined total of up to N3.8 trillion was recorded as the amount lost from crude oil theft, sabotage and pipeline vandalism.

It further stated that this was principally as a result of the force majeure declared at the Forcados terminal, combined with wider pipeline infractions and theft.

The government’s share of this loss, it explained was approximately 42 per cent or about N1.6 trillion.

“The Nigerian government passed a record budget of N9.12 trillion with a revenue target of N7.2 trillion, most of which it aims to achieve from the petroleum sector. Therefore, at a time when the country has just exited recession and the economy remains fragile, with national debt on the rise, reducing oil theft should clearly be an urgent national priority,” said NNRC in its advice to the government.

The NNRC equally observed that although oil theft was as old as the sector in Nigeria, the level of stealing rose with time.

“However, as the stakes got higher over time and with global oil prices rising above $100 a barrel in the early 2000s, oil theft evolved into a cottage industry, creating consequential socio-economic problems.

“Over the last decade, oil theft has risen to unprecedented levels, peaking between 2011 and 2014. The inability of the government and oil companies to curb this epidemic has made Nigeria the country most plagued by oil theft in the world,” it added.

NNPC, Shell, others to take FID on Bonga SW oilfield in 2019

Meanwhile, the NNPC, SNEPCo, ExxonMobil, Total and the other partners will take the FID on the development of the Bonga South West/Aparo (BSWA) deepwater project in 2019.

The BSWA project includes the construction of a new Floating Production, Storage and Offloading (FPSO) unit with an expected peak production of 225,000 barrels of oil per day.

THISDAY gathered that the BSWA field straddles Oil Mining Leases (OMLs) 118, 132 and 140.

However, the bulk of BSWA resources are located in OML 118 but it also extends into OMLs 132 and 140, operated by Chevron, where it is called Aparo.

SNEPCo is the operator of the BSWA project in line with the agreement between the NNPC, Esso Exploration & Production Nigeria (Deepwater) Ltd., Total E&P Nigeria Ltd., Nigerian Agip Exploration Ltd., Texaco Nigeria Outer Shelf Ltd., Star Ultra Deep Petroleum Ltd., Sasol Exploration and Production Nigeria Ltd. and Oil and Gas Nigeria Ltd.

Reuters quoted the Managing Director of SNEPCo, Mr. Bayo Ojulari, as saying that Shell and its partners would decide next year on whether to go ahead with the development of the oilfield.

Ojulari added that the project, one of the country’s largest with an expected production of 180,000 barrels of crude oil per day, would generate profit at crude oil price of below $50 per barrel.

According to him, Shell is currently negotiating a Production Sharing Contract (PSC) with the Nigerian government, which will determine the viability of the project.

“The negotiations are expected to finish this year,” he added.

The Minister of State for Petroleum, Dr. Ibe Kachikwu, had earlier requested the NNPC and the other partners to commence the tendering process for the execution of the project.

Kachikwu’s directive was said to have followed the April 17, 2018 meeting between President Muhammadu Buhari and a delegation from Royal Dutch Shell Plc., led by the Chief Executive Officer, Bern Van Beurden, in London, where a decision was reached that the oil giant and the NNPC would begin the implementation of projects that have been on the drawing board for several years.

The London meeting, which was facilitated by Kachikwu, also had in attendance the Group Managing Director of the NNPC, Dr. Maikanti Baru.

THISDAY had reported that the meeting was said to have presented an opportunity to open investment talks of up to $15 billion to be invested by Shell in Nigeria.

Estimated to cost about $10 billion, the Bonga South West/Aparo project, which has been on the drawing board for several years, is being executed by SNEPCo under a PSC arrangement with the NNPC.

First oil from the project, which is expected to add 225,000 barrels per day of crude oil to Nigeria’s daily production at plateaux, is expected in 2021 or 2022.

Other key projects that have also suffered delays in Nigeria’s oil and gas industry include: the 120,000bpd Shell and Eni’s Zabazaba/Etan project in the disputed Oil Prospecting Lease (OPL) 245, ExxonMobil’s 140,000bpd Bosi project, ExxonMobil’s 110,000bpd Uge project and Chevron’s 100,000bpd Nsiko deepwater project.

The delays in the execution of these projects, which are estimated to cost about $23 billion, are largely caused by the lack of clarity of terms as a result of the non-passage of the 18-year-old Petroleum Industry Bill (PIB), and inadequate funding.

However, following the meeting between the president and the Shell executives, Kachikwu directed the NNPC to conclude all the processes leading to the execution of the Bonga South West project latest by June 18.

The petroleum minister had stated that his directive was in furtherance to the meeting held between the president and the Shell executives in London.

Buhari and the Shell executives were said to have discussed the Bonga offshore oil field development and the expansion of liquefied natural gas projects.

Shell had confirmed the meeting, saying: “Both projects are subject to a future final investment decision and we continue to work with our partners and the government towards that in each case.”

Following Kachikwu’s directives, the NNPC, through its investment arm, the National Petroleum Investment Management Services (NAPIMS), had also approved the Invitation to Tender (ITT) documents prepared by SNEPCo for the six packages in the project.

In a related development, the federal government and NNPC have been commended by the Nigerian Agip Oil Company (NAOC) for what it described as an improved security situation in the Niger Delta.

NAOC, in a statement from the NNPC said the improvement has rubbed off positively on its operations, and it would leverage it to conclude works on two new energy projects it has in the country.

NNPC’s Group General Manager, Public Affairs, Mr. Ndu Ughamadu, said the Chief Operating Officer, Upstream, Eni, Mr. Antonio Vella, said this when he led the management team of NAOC on a courtesy visit to the Group Managing Director of the NNPC, Dr. Maikanti Baru.

Vella reportedly said the prevailing peace and security in the region had increased investors’ confidence in Nigeria’s petroleum industry, adding that his company was considering doubling its investment in the country.

“The steps the GMD has taken have greatly improved security in our area of operations, that is very important to us as it has given us confidence to come back strongly and raise oil and gas production. And that is what we are doing, we are increasing our budget in Nigeria because we have confidence in Baru and the entire system,” he said.

He also disclosed that NAOC was redoubling efforts on the ongoing expansion of the Okpai Independent Power Project (IPP) and the Zabazaba deepwater project to achieve early completion as a result of the improved operating environment.

According to him, the Okpai IPP expansion would be completed by the second quarter of next year and would raise the power generating capacity of the plant by over 50 per cent.