Again, Nigeria Cuts Oil Production Losses from Sabotage, Assets’ Breakdowns, Force Majeure in March

Emmanuel Addeh

Nigeria recorded significantly less oil production losses in the February/March drilling cycle, with shutdowns arising from sabotage, force majeure, crude production assets’ breakdowns and community issues markedly down to 1.69 million barrels for the entire month.

Force majeure refers to a clause in contracts that allows both parties to walk out of the contract when an extraordinary event or circumstance beyond the control of the parties happens.

The figure is a major improvement on the January 2022 high of 7.5 million barrels lost to the phenomena, a development that has negatively impacted the country’s capacity to export the commodity.

The government did not explain the reasons behind the declining numbers, but it had recently ordered a crackdown on oil theft in the Niger Delta by deploying the military in the region. 

Over a week ago, in furtherance of Operation Dakatar Da Barawo (OPDDB) that was launched to checkmate crude oil theft and related acts of economic sabotage, the Nigerian Navy said it had seized 6, 000, 000 litres of stolen crude oil estimated at N264 billion.

However, THISDAY can report that the new data released by the Nigerian National Petroleum Company (NNPC) Limited, in its April presentation to the Federation Account Allocation Committee (FAAC) was compiled before the latest onslaught.

Nigeria has for months been unable to meet the production quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC) due to losses to facilities’ breakdown, vandalism and outright sabotage as well as community issues.

The menace has further impacted on government institutions as well as individual operators who have recently raised the alarm over the humongous losses the nation and private entities are being subjected to.

Among those who have raised the alarm over the situation in recent times were the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, Chairman, Independent Petroleum Producers Group (IPPG), Mr Abdulrasaq Isa and the management of Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline, one of the most impacted by the activities of vandals.

Also adding their voices to draw attention to the negative impact of the menace were the Founder Heirs Holdings ltd, Mr Tony Elumelu, Co-founder and former Chief Executive Officer of Seplat Energy Plc, Mr Austin Avuru and the General Overseer of the Redeemed Christian Church, Pastor Enoch Adeboye.

Nigeria’s upstream petroleum sector has struggled in the last one year, due to deteriorating facilities occasioned by waning investment as well as oil theft, sabotage and community issues.

With an average oil price for the month of February/March at over $100, it is estimated that the country may have lost as much as $170 million to the menace during the period under review. That would be the least loss recorded in a long time.

Recently, THISDAY reported that a  combination of huge oil pipeline repair cost and high-level theft of crude oil was bleeding out the Nigerian economy, with losses amounting to at least $29 billion in the last six years, spanning between 2015 and 2021.

In February 2021, the NNPC Limited had said the country lost an average of 200,000 barrels per day of its crude oil production to saboteurs and illegal pilfering by criminals.

Partly due to under-production, the NNPC has  failed to remit its statutory funding of the Federation Account, a joint pool collectively operated by the federal, state and local governments since the beginning of this year despite the rising international prices of oil.

This would be the third time in less than a year that the company would be unable to deliver a kobo to the joint account, following the same occurrence in April last year, when the firm announced zero remittance for the month.

A THISDAY review of data in recent months showed that while losses in September 2021 rose to 7.1 million barrels, it was 5.2 million barrels in October of the same year while in November it was a 6.36 million barrels loss to the aforementioned issues.

Furthermore, in December 2021, the losses recorded from force majeure, facilities’ breakdowns, sabotage as well as disagreements with host communities amounted to 4.82 million barrels, before peaking in January at 7.5 million barrels.

But it was observed that in February the number fell to 2.21 million barrels, while it fell further in March to 1.69 million barrels. Although there was an over 200 per cent reduction in losses, but some terminals still suffered.

With eight incidents during the month under review, Odudu terminal experienced the highest loss of 937,663 barrels occasioned by maintenance work on the facility as well as Ima while Okwori was shut due to power shortage.

In addition, production was curtailed at Jones Creek, to the tune of 327,000 barrels due to funding challenges while Brass lost 180,000 barrels as a result of a leakage at the manifold as well as pressure build-up.

At the Ukpokiti terminal 210, 000 barrels were lost due to a fire incident leading to the shutdown of the facility for 26 days, while Excravos shed 21,009 barrels die to a breach of one of its pipelines , a major improvement from recent shutdowns.

Also, Ajapa shed 9,000 barrels, Aje lost 11,000 barrels, Forcados lost a meagre 997, while Bonga shed 184 barrels.