Despite Multi-billion Naira Spending on Oil Assets Protection, Nigeria Records Least Crude Output in Four Years

Emmanuel Addeh in Abuja

In spite of massive official and back channel spending on oil assets protection in the Niger Delta, Nigeria’s crude oil production declined year-on-year, in the first eight months of 2023, compared to the same periods in 2020, 2021 and 2022.

A THISDAY analysis of oil output figures in the last four years showed that Nigeria was actually able to drill more oil in a COVID year as well as periods when there was less focus on fighting oil theft in the Niger Delta than it is currently doing.

While in the first eight months of 2020, due to the Covid-19 pandemic, the country’s total crude output volume slowed to 283.4 million barrels, in 2021, this rose markedly to 327.6 million barrels between January and August.

Also, despite the many reported security breaches in the region, the production figure increased significantly to 386.4 million barrels in the first eight months of 2022, just before the Nigerian National Petroleum Company Limited (NNPC) awarded pipelines and other oil assets protection contracts to non-state actors.

However, the THISDAY review of the data from the industry regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), showed that after sinking billions in security contracts, Nigeria has only been able to produce an abysmal 252.9 million barrels in the months spanning January and August 2023.

In the heat of the controversy surrounding the contracts to Tompolo‘s Tantita and another company, Pipeline Infrastructure Nigeria Limited (PINL), the NNPC leadership on August 30, 2022, defended the move as the ‘right decision’.

Speaking at the Presidential Villa, Abuja, the Group Chief Executive Officer of the NNPC, Mele Kyari, said the decision was necessitated by the need for Nigeria to hire private contractors to man its oil pipeline network nationwide due to massive oil theft.

He stated that the award of the contract to a former leader of the Movement for the Emancipation of Niger Delta (MEND), whose actual name is Government Ekpemupolo, was not the first time that individuals within the Niger Delta region were awarded contracts for pipeline surveillance.

Although the actual contract sum was not disclosed by the NNPC, it is believed that the surveillance contract is worth N48 billion per year. That is, N4 billion per month. This figure has not been disputed by the authorities.

This is also aside the funding of official security agencies, including the navy, army, airforce, marine police and other paramilitary agencies operating in the region, who have severally been blamed for complicity in oil theft.

At the time, Kyari said that the federal government was not dealing directly with Tompolo but a private contractor’s company he has interests in.

The deal has also received mixed reactions from the leaders in the region. For instance, while the erstwhile Governor of Delta state, Ifeanyi Okowa, commended the Nigerian government for awarding the contract to the local security entity, the new Governor of Rivers State Siminalayi Fubara, has kicked against the modalities for the award.

However, the data from the NUPRC indicated that the situation was better when there was no so-called ‘renewed fight’ against oil theft in the region since August last year.

It showed that for the first eight months from 2020 to 2021, the volume of production grew steadily by 44.2 million barrels and even returned better yields between January and August in 2022, with a growth of 58.8 million barrels.

But the figure has now fallen year-on-year in 2023, with total oil volume drilled in the same period as the previous four years decreasing massively by as much as 133.5 million barrels during the period spanning January to August, 2023.

Aside the local security contracts for pipeline surveillance and the increased funding for official security apparatus in the Niger Delta region, the NNPC recently announced that it now has a real-time mechanism to monitor infractions on the country’s oil assets, similar to that of Saudi Aramco.

It also announced a reward for whistle-blowers who report cases of pipeline vandalism and other economic saboteurs to the authorities.

However, the moves appear not to be working as month-on-month improvement on oil production has only been marginal, while it has recorded a year-on-year deficit.

Nigeria’s Organisation of Petroleum Exporting Countries (OPEC) quota was slashed from 1.8 million barrels per day to 1.742 million bpd initially when it was obvious that the country was unable to meet the monthly production allocation.

 The cartel has now further slashed the quota to about 1.38 million bpd for 2024 for the same reason that Nigeria’s has continued to underperform.

The country has continued to lose as much as 560,000 bpd to massive underproduction in the last few months and only struggled to drill 1.18 million bpd out of the 1.742 million bpd quota in August.

A deal to loan $3 billion from the AfreximBank to boost FX inflow due to the dollar crunch in the country now appears stalled. After the initial euphoria, the federal government and the NNPC have been silent on the matter.

Furthermore, the nation’s local currency, the naira has also been massively devalued compared to the dollar as the NNPC and its partners cannot generate enough FX for the country. Nigeria gets over 90 per cent of its foreign exchange earnings from the oil and gas sector.