Nigeria Loses N2.2trn Revenue To Crude Production Delays In One Year

Nigeria lost a whopping N2.1 trillion as a result of crude oil production deferment in one year.

The 2021 statistics from the Nigeria Extractive Industries Transparency Initiative (NEITI), said the huge loss was recorded in 2020.

The revelation comes on the heels of perpetual low crude oil production being recorded by the country in the past two years.

Deferment is the reduction in production or injection availability caused by an activity, breakdown, trip, poor equipment performance, or sub-optimum operations, resulting in a reduction in the volume sold or injected, delaying the production or injection until a later time.

According to the NEITI’s Oil & Gas Report 2020, the deferment was recorded by crude oil companies, including SNEPCO, CNL, NAOC, SPDC, NPDC SEPLAT, Newcross E & P, and APENL.

Others are: Continental, Energia, AITEO, Oriental, APDNL, Consolidated, Waltersmith, AND Chorus operating in the country.

A breakdown of the loss revealed that Shell Nigeria Exploration and Production Company (SNEPCO) recorded the highest deferment of approximately 25 per cent (17.8mn/b), followed by Chevron Nigeria Limited (CNL), 17 per cent (12.2mn/b).

The Nigerian Agip Oil Company (NAOC) ranked third on the list with 15.4 per cent (11.1mn/b), and Shell Petroleum Development Company (SPDC) with 15.1 per cent (11mn/d).

The Nigerian Petroleum Development Company (NPDC SEPLAT) deferred 7.4m/b or 10.2 per cent/b of the production, while NewCross E&P deferred 4.2m/b or 5.8 per cent of output in that year.

Addax Petroleum Exploration Nigeria Ltd (APENL) could not produce 2.3mn/b or 3.1 per cent of its oil in that year, Continental deferred 2.1mn/b or 3 per cent, while SEPLAT deferred 1.3mn/b or 2 per cent of its production that year.

The Nigerian Petroleum Development Company Ltd deferred 1.2mn/b or 1.7 per cent production in the year under review, while Energia could not produce 966t/b or 1.3 per cent.

Aiteo deferred approximately 470t/b or 1 per cent; Oriental, 265t/b or 0.1 per cent; and Addax Petroleum Development Nigeria Limited (ADPNL) deferred 144t/b or 0.20 per cent.

Consolidated Oil Limited could not produce 44t/b or 0.06 per cent; Waltersmith, 24t/b or 0.03 per cent; with Chorus Energy Limited ranking last on the deferment list with 5t/b or 0.01 per cent.

In total, the country lost approximately 73mn/b to crude oil production deferment in 2020.

International Brent sold at $71 in 2020, pegging total revenue loss to deferment by Nigeria at $5.2bn or N2.2trn.

A similar report by the NNPC for August 2021 put crude oil production loss to deferment in April same year at 3.3mn/b. Brent was $71/b in 2021. Total revenue loss to deferment in just April last year was N248mn.

A breakdown of the NNPC’s report said injection into Forcados was curtailed due to Seplat shutdown for planned TFP repairs. Pan Ocean OML 147 shut-in production to avoid tank top and also because of industrial action. Also, some stations were shut down on 11/03/2021 for Trans Ramos Pipeline repairs. The cumulative loss for the period was 1.5mn/b.

Production shut down due to maintenance in Yoho and Ima terminals amounted to a 210,000b and 31,000b loss respectively.

The power outage resulted in a shutdown on 30/01/2021 at Bonga terminal. This gave an aggregate loss of 1,000,000b.

There was also a shutdown at Akpo and Erha due to the detection of gas at the starboard riser and repairs of the epoxy pipe. Also, Jisike was shut down due to industrial action by PENGASSAN. The cumulative loss of production within the period was 35,000/b, and 560,000b and 13,500b.

The Egina Terminals was shut down due to power failure while Pennington Terminal was shut down for vessel swap and SPM B chain adjustment. These amounted to an aggregate loss of 65,000b and 125,000b respectively.

Total deferment for April 2021 amounted to about3.5m/b.

Brent sold at $71 in 2021, amounting to a total of N248mn revenue loss to deferment in April 2021.

Energy law expert at Bloomfield, Ayodele Oni, said the implications of delayed productions were quite telling as it cumulated in the delayed implications for the national budget.

“First, it makes nonsense of our budgetary plans in terms of expected revenues and means. We will need to borrow more and the government won’t be able to do some of what it should do.”

Overall, he said it was not a good outlook.

“It will slow down much of what government is doing and seeks to do. With the politics season slowing down government business, this potentially makes matters worse and the economy abysmal. It could also lead to a further devaluation of the Naira,” he added.

On his part, educationist and oil and gas expert, Dr. Austin Nweze, said as much as delay would cause revenue to drop, Nigeria should always look for alternatives to make up for the situation

“There will be revenue loss because there’s a demand to meet. However, the country must always provide alternatives to increase production so as to meet customers’ demand, because if the contract is not meant, then, it is a bad reputation for the country and customers will find another buyer.”

“In case of a force majeure, for instance, customers must be informed of the delay, and then a new date be set, even if it means the country buying from another country to meet its contracts, else, costs will be incurred,” he said.

Independent researcher & development practitioner with wide experience in academia, development policy research, advocacy, and technical advisory, Dr. Dauda Garuba, also said crude oil production delay meant revenue loss for the country.

“A delayed production means less export and less income for the country. If you don’t have enough to take to the market, then, you will not have enough profit to bring home,” he said.

Aside from the loss to deferment, Nigeria loses huge revenue to oil theft.

According to the GMD, NNPC, Mele Kyari, the country loses an average of 200,000 barrels of crude per day to oil thieves, translating to 73million barrels in a year. Using an average crude oil price of $100 per barrel, Nigeria loses over $7.3bn in a year or in five years (between 2016 and 2020) an estimated $14.65bn, considering the cost of oil per barrel at the years under review.