Nigeria Loses $800m Worth of Oil to Shut-ins, Facilities’ Failures, Others

•Goldman Sachs cuts oil price forecast

Emmanuel Addeh in Abuja

The Nigerian economy continues to bleed from massive oil losses as a result of facilities shut-ins and equipment failures in August, shedding as much as $800 million in revenues that could have accrued to the federation.

The latest presentation by the Nigerian National Petroleum Company Limited (NNPCL) to the Federation Account Allocation Committee (FAAC) indicated that as much as 8.14 million barrels of crude oil were lost during the month under review.

With an estimated average oil price of about $100.45 for the month of August,  it is estimated that the country may have lost as much as $800 million to the various leakages during the period.

The figure represents an increase compared to the loss in July which was  7.56 million owing mainly to vandalism, workers’ strikes, depreciating upstream infrastructure as well as force majeure.

In July, the losses came from nine major incidents across the Niger Delta.  But it excluded the ongoing massive oil theft around oil-producing communities.

The NNPCL has been unable to contribute a kobo to the federation account since this year, thereby crippling most dollar-related transactions in the Nigerian economy.

The scarcity of the greenback has also impacted negatively on the value of the naira, with the local currency falling to as low as N700 in the last few months.

The report stated that Forcados terminal lost about 667,500 barrels of oil, hindering export operations between July 17 and August 5,  following reports of a sheen in the vicinity of the asset.

This led the Shell Petroleum Development Company (SPDC) to request that all injectors be halted.

At the Qua Iboe terminal, the report noted that  a warning strike declared by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) resulting in a crude loss of 1.47 million.

According to the NNPCL, the warning strike which lasted seven days, was due to the divestment of assets by Mobil Producing Nigeria Unlimited (MPNU) without notification.

Bonny terminal also took a massive hit, recording a loss of 3.5 million barrels of oil loss throughout the month and dropping significantly to an average of about 3mbd since the 21st of march 2022 till date.

This forced the terminal operator to declare force majeure on all outstanding bonny programmes, the national oil company stated.

At the Bonga terminal, the facility recorded a production loss of 658,085 barrels of oil due to repair works which required that the Floating Production Storage and Offloading (FPSO) facility be kept at the 16-metre draft to facilitate the process.

Also at the Yoho terminal, 329,000 barrels of oil production loss was recorded from July 1 to 31 as it encountered a shutdown to curtail flaring, while Erha terminal shed 937,663 barrels of oil from July 1 to 15 due to a plant trip.

The oil losses continued in Brass terminal, which  was shut down following low crude oil receipt as a result of theft activities and illegal connections, consequently leading to the loss of 315,000 barrels of oil.

The story was the same in Ukpokiti terminal as it was shut-in due to  a fire outbreak which affected oil exports , with a loss of 210,000 barrels of crude as well as the Aje terminal which was shut down making it lose 11,000 barrels.

Nigeria, Africa’s largest oil producer and a member of the Organisation of Petroleum Exporting Countries (OPEC) has tried to stamp out sabotage on its pipeline network in recent years without much success.

Some operators have said they receive as little as 5 per cent of crude volumes pumped through the TNP pipeline, for instance, reflecting a larger issue for the country which is already facing shrinking investment and hasn’t been able to meet its oil-production quota in order to benefit from a surge in prices.

However, the new figure was substantially less than the 9.4 million barrels of oil lost in June due to the same disruptions on some of the key facilities in the Niger Delta.

The federal government had recently deployed various strategies to curtail the leakage of Nigeria’s oil production, including the dispatch of more military personnel as well as virtual monitoring of some of the facilities.

The NNPCL has also proposed a reward system for whistle-blowers who report vandalism and has recently re-awarded a pipelines protection contract to ex-militant, Mr Government Ekpemupolo, also known as Tompolo and other key Niger Delta leaders.

Meanwhile, Goldman Sachs cut its oil price forecast yesterday on the deteriorating global economic outlook, citing the strong dollar and weakening demand forecast.

It noted that this would remain powerful headwinds to prices into year-end, but added that the structural bullish supply set-up due to the lack of investment, low spare capacity and inventories has only grown stronger, inevitably requiring much higher prices.

The firm, in a note to clients said the  price of Brent crude oil will average $100 per barrel over the last three months of the year—down from its previous bullish forecast of $125 per barrel.

The forecast before now,  was already down from yet another projection of $130 per barrel. Currently, Brent is trading at about $85 per barrel.

For next year, Goldman said it saw Brent averaging a likely $108 per barrel, also down from its previous prediction of $125 per barrel.

For OPEC, Goldman predicted that the group will keep production near current levels for the remainder of the year, although any significant production cut at the upcoming October 5 meeting would trigger a rebound in prices.