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How theft stalls accurate measurement of oil output

By on May 13, 2013

A GRAPHIC picture of how sophisticated oil theft gangs in the Niger Delta frustrate an accurate measurement of the actual amount of oil that Nigeria produces was painted at the just-concluded Offshore Technology Conference (OTC), Houston, Texas, United States (U.S.).

The theft and other factors have made the country to be losing N160 billion monthly, according to the Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala.

During a conference in the U.S. recently, Okonjo-Iweala said: “A great deal of loss in production is closely linked to oil theft and illegal bunkering which have been going on for sometime. The thefts are getting more invasive as the criminals are going beyond the outer pipelines and moving into the more sensitive pipes. We estimate total losses at over 300,000 barrels per day (bpd).

“In all, we estimate that current production has dropped to between 2.1 to 2.2 million bpd leasing to about $1 billion (or N160 billion) a month in revenue. The current production figure is thus lower than the actual production level in 2012 and obviously lower than the projected output of 2.528 million bpd underpinning the 2013 budget, which was derived in consultation with the NNPC.

Besides, a groundswell of support for the proposed oil industry reform legislation designed to position the sector on the path of growth and sustainable development appeared on the horizon at the ongoing Offshore Technology Conference (OTC) in Houston, Texas at the weekend as key stakeholders harped on the importance of the bill.

The event was the Petroleum Exploration Technology Association of Nigeria (PETAN) OTC seminar which has over the years emerged an integral part of Nigeria’s participation in the yearly global oil and gas conference.

At the pavillion of Expro, an America-based company that specialises in well-flow management and manufacture of oil production meters, a two-man delegation of the Nigeria Extractive Industries Transparency Initiative (NEITI) was told how it is possible to install measurement meters at the well-head that will ensure oil production output is measured directly from the flow-station.

Up till now, the International Oil Companies (IOCs) operating in Nigeria have continually insisted that it is not possible to measure oil production from the wellhead.

This is contrary to the position canvassed by the immediate past Board Chairman of NEITI, Prof. Assisi Asobie, who continued to push for the determination of measurement of Nigeria oil production from the well-head.

In his explanation, the General Manager of Expro, Mr. Patrick Curry, submitted that it takes only about 30 minutes to install a meter and that the meter does not require routine maintenance.

He also said the equipment could be used with solar energy as a way of circumventing the acute energy shortage in the country.

Curry, however, expressed worry about government bureaucracy in an effort to introduce the meter into the country. He also said no attempt had been made to introduce the equipment to IOCs in Nigeria.

In his contribution, NEITI Director, Technical, Mr. Tariye George, assured the firm that government had the will to enforce all IOCs in the country use the equipment on the well-head.

Tariye also hinted of the readiness of NEITI to pay facility tour to the headquarters of the Expro before the end of July in order to kick-start the measurement of Nigeria’s oil production from the wellhead.

A member of NEITI Board, Patrick Udomfang, said the visit of the delegation to the biggest offshore technology exhibition was to have interface with manufacturers whose equipment could help foster transparency and accountability in the Nigerian extractive sector.

He said: “I am happy I came here. Part of what has come to the fore is what was hitherto shrouded in mystery. For instance, the IOCs have been telling us that it is not possible to measure oil production from the well-head but I can see today that that is not correct. We have seen equipment that can do that. These games are over now because very soon, NEITI will make it mandatory that all oil companies operating in Nigeria must measure their productions from the well-head.”

Speaking with The Guardian on the condition of anonymity, an operator in the oil and gas sector faulted the communication strategies adopted by the IOCs that led to the wrong message sent to Nigerians and government over the years.

But according to him, instead of oil companies to argue that oil theft makes measurement at the well-head an unwise business decision, they continue to deceive both government and the people by dismissing the possibility of measuring oil production from the wellhead.

He added: “The IOCs have had wrong communication strategies over the years. It is known worldwide that it is indeed possible to measure oil production from the wellhead. In our neighbouring countries such as Gabon, Algeria and Libya, among other oil-producing countries in Africa, oil production is measured from the well-head and this is known to everybody in the industry. It is surprising why IOCs would choose to play the ostrich in this matter. To my mind, their argument should be that so many underhand practices happen between the flow-stations and terminal such that there is so much oil thievery going on in this corridor. Therefore, the argument should be that if they measure at the well-head, there is no way they can account for what would be lost to thieves and therefore they would be shortchanged in the process. It is not measurement that is the problem, it is the massive oil theft that happens in Nigeria that is the problem. Government must develop the will to stop this huge economic sabotage. No low level Nigerian is empowered to steal oil; it is big people – politicians, traditional rulers, senior military officers and business moguls who fund elections that are involved in the dirty business. It is not for government to lament huge appetite for Nigerian stolen oil by the international community but for it to confront these thieves frontally.”

Meanwhile, speaking on the fringe of the conference, the Executive Secretary of Nigeria Content Development and Monitoring Board (NCDMB), Ernest Nwapa, has cautioned against seeing the Petroleum Industry Bill (PIB) as a cure-all pill that will automatically erase the challenges in the oil and gas industry.

He said that the passage of the PIB should be a springboard upon which millions of jobs would be created rather than seen as an end in itself.

His words: “That the PIB would make investment flow is a very good assumption. This is conventional wisdom. Therefore, it is expected that the PIB when passed would result in massive investments flow …but what we have been looking for is a kind of impact that can give us employment on top of the revenue.

“But where we are today is if big multi-nationals and other companies do not establish yards where they manufacture components in Nigeria, when the investments from the International Oil Companies (OICs) come, we would lose out.”

He, therefore, called for the domestication of the benefits that will accrue from the passage of the bill, saying “it is one thing to get the investments in because we need to increase our revenue intake from oil production, but the real end-game for us is when as we are getting revenues, we are getting our people to work. Government agencies cannot employ an army of people but the real employment can come from commercial activities that would arise from our preparedness to expand operations that can generate jobs.”

During the OTC, the Group Managing Director of the Nigerian National Petroleum Corporation, Andrew Yakubu, teed-off the session with a presentation titled “Post-PIB Challenges, Prospect and Opportunities”- to herald what turned out a well-rounded discussion.

Describing the PIB as an essential tool for the sustainable development of the industry in Nigeria, Yakubu stressed that the proposed law would present multi-dimensional approach to the nation’s oil and gas resource management that would ensure greater active contribution by players and stakeholders under prudent government structure of the industry.

“It also stipulates guidelines for operations in the upstream and downstream sectors which can be viewed in terms of the following thematic areas: policy, legal and regulatory dimensions, economic dimensions, including participation and ownership, knowledge-based human and institutional capabilities, environmental stewardship as well as governance structure for sustainable resource development,” the GMD said.

Commenting on the introduction of the Petroleum Host Community Fund, Yakubu said that the proposed Fund incorporates lessons learnt from the Niger Delta on all new frontiers.

“The Fund is a mechanism to formally recognise host communities as important stakeholders by assigning oil and gas infrastructure security to the host communities and minimising environmental degradation due to vandalism and crude oil theft,” he said.

According to Yakubu, the Fund also incorporates penalties to host communities in the event of vandalism in their localities.

“The proposed legislation includes modalities for using regulations to increase flexibility in managing host community issues”, he said.

In his contribution, Emmanuel Paulker, Chairman, Senate Committee on Petroleum Upstream, reiterated the readiness of the Senate to work with the Executive in ensuring the smooth passage of the bill.

“I cannot commit to any particular date but I know that this PIB must be passed.” he said.

The senator thanked the Executive for ensuring that, this time around, there was no issue of duplication or circulation of different versions of the draft bill.

House Minority Whip and Chairman, House Committee on PIB,  Samson Osagie, also restated the commitment of the National Assembly in ensuring the passage of the bill.

“The position of the National Assembly on the Petroleum Industry Bill is that we are passionate about passing this bill into law because it consolidates about 16 legislations in the sector and for the first time the Nigerian government is coming out to say that this industry needs to be re-organised and reformed so that the eventual benefit will get to the government and people of Nigeria,” he said.

Earlier, Mark Ward, Managing Director of ExxonMobil, speaking on behalf of the IOCs, expressed readiness of the industry operators to work with relevant stakeholders and the National Assembly in ensuring the passage of a balanced oil reform law.

 

 

[Guardian]