MEASURING NIGERIA’S CRUDE PRODUCTION

Crude pumped out of the wells must be metered for transparency

For several years, the Nigeria Extractive Industry Transparency Initiative (NEITI) has been harping on the need to bring integrity to bear on the operations of the oil sector. The agency had in all its oil and gas audit reports repeatedly recommended that meters be placed on oil wellheads to measure the volume of crude oil produced across the country. But little or nothing had been done as the sector more or less still relies on estimated values. Last week, the new NEITI Executive Secretary, Orji Ogbonnaya-Orji repeated the old complaint. “As we speak, it is very difficult for any Nigerian to ascertain how much we are actually producing,” said Orji. “If you do not know how much you are producing how would you know how much you are expected to earn?”

The issue of metering and determining the actual production as well as losses are the responsibilities of the Department of Petroleum Resources (DPR), the regulatory agency for the oil and gas industry. Even though the spokesman of the agency, Paul Osu refuted the allegation last week, arguing that “every litre of crude produced in Nigeria is adequately captured during the process of extraction,” the DPR has not shown either the competence or the willingness to tackle the recurrent issue by applying industry best practices of measuring at the wells, the flow station and at the terminals, as they do in other countries. According to an energy expert and chair of Nigerco Nig. Ltd, Mr. Yagbagi Sani, “No one actually knows what comes out of the well and what happens between the well and tank farms.” The report of the Petroleum Revenue Special Task Force headed by former Economic and Financial Crimes Commission (EFCC) chairman, Mr Nuhu Ribadu, had also made specific recommendations that impinge on accountability and transparency in the sector. The report is still gathering dust on the shelf.

The Economist in its 10th October 2013 report on the mismanagement of the oil and gas sector in Nigeria put it bluntly: “…oil is also being stolen at a record rate and traders’ figures show output at well below the government’s figures. Information about Africa’s biggest oil industry is an opaque myriad of numbers. No one knows which ones are accurate; no one knows how much oil Nigeria actually produces. If there were an authoritative figure, the truly horrifying scope of corruption would be exposed.”

Indeed, a report in 2019, prepared by the Nigeria Natural Resources Charter (NNRC), was evident that the practice is deep-rooted. It revealed some of the smart ways International Oil Companies (IOCs) operating in oil fields in the country usually steal and siphon large volumes of crude oil undetected by the Nigerian authorities. Exploring the political economy of oil theft in Nigeria, its causes, and dimensions, the report divulged how the practice was handed down from the military to the civilian authorities in 1999, when the country returned to democratic government. But the relevant authorities seem clueless about how to contain these acts of sabotage that have serious economic and security implications for our country.

It is absurd for Nigeria to continue to fold its arms and watch this economic haemorrhage as an average of 200,000 barrels per day of oil, according to the report, was stolen and about 100,000 lost to shut-ins as a result of pipeline damage, down time and deferred production in the first quarter of 2018 alone. The impact of such large losses in addition to direct stealing of oil products is immense as they translate to severe revenue shortages in times of excruciating hardship. Oil pumped out of the fields must be metered to stop this long flirtation with economic crimes.