Despite dwindling revenue and increasing debt profile, the Nigerian National Petroleum Corporation (NNPC) spent about N33 billion on repairs and maintenance of pipelines within a space of 13 months.
The rate of pipeline vandalism has proven to be a recurrence, and as a result, part of the monthly remittances to the Federation Accounts is used for repairs and maintenance.
Between January 2020 and January 2021, data from the Federal Account and Allocation Committee (FAAC) showed that in the first quarter of 2020, a total of N10.2 billion was expended on repairs, with a crude and product loss valued at N21.6 billion.
In the second quarter of same year, the FAAC report also showed that despite the COVID-19 lock down which crippled economic activities across the country, N13.2 billion still went for repairs.
Moreover, the cost of repairs within the second quarter was the highest, with product loss valued at about N6billion.
Similarly, for the third and fourth quarter, N2.6 billion and N7 billion were respectively spent for the same purpose, while the accrued value of product loss for both quarters was put at N6 billion.
Meanwhile, pipeline repairs and crude oil losses were not recorded in September and December of the same year.
…..508 vandalism cases
“Products theft and vandalism have continued to destroy value and put NNPC at disadvantaged competitive position,” says the Corporation in its monthly financial and operations report.
Although there was drastic decrease in reported cases of vandalism compared to 2019, where 1,544 cases were recorded, a total of 508 pipeline points were vandalised between January 2020 and 2021 same month.
Still, the menace persists at a cost to the federal government.
From the performance data, further breakdown of the figures show that Mosimi-Ibadan line constituted the most vandalised point within the period. It had the highest cases of attack in April.
Mosimi also accounted for more than 50 per cent, 320 in total, of all vandalised points while 59 and 43 cases were recorded in Port Harcourt and Kaduna respectively.
In 2020 Q1, for instance, 111 points were vandalised.
Experts believed that due to the COVID-19 lockdown, the figure of destroyed pipelines increased to 135 in Q2 while 94 and 101 were reported in Q3 and Q4 respectively.
Only 27 incidences were reported in January 2021.
Apart from the financial burden these incidences place on the NNPC’s remittances, the environmental and health implication of oil spillage due to product leaks also calls for concerns.
NNPC›s outrageous deficits
The NNPC, an oil corporation through which the FG conducts its petroleum businesses, is empowered to conduct trading operations and also allowed to deduct operational expenses from its revenue before remitting the remaining into the Federation account.
Such deductions may include Joint Venture Cost recovery, strategic holding cost; second cases contribute to remittance deficits. For instance, within the months under review, the Corporation generated an accrued N2.6 trillion as revenue but only remitted N1.1 trillion. The remaining sum went to various deductions as contained in the NNPC’s monthly FAAC reports.
Incidentally, this brings the total deductions to N1.5 trillion.
A careful study of the figures also revealed that in February, April, May, June, July and November 2020, the Corporation incurred N5 billion, N21 billion, N106 million, N29 billion, N20 billion and N17 billion deficit respectively.
The total deficit within the above period is N92.6 billion. This is almost an accrued sum – N94 billion received by all the 36 states combined from the gross statutory revenue of the FAAC disbursement in March 2021.
Meanwhile, it is worthy to note that monthly remittances are made in arrears. For the purpose of clarity, the N125 billion remitted in the month of February, for instance, was paid to cover for January, 2020. Meanwhile N120 billion was remitted for the month, leaving N5 billion as surplus.
What N33 billion could achieve
With the increasing spate of insecurity in the country, it has become imperative for the Nigerian government to reinforce the security agencies with the right technology, resources and equipment to combat the new trend.
As such, findings showed that the N33 billion lost to pipeline repairs could buy the Nigeria Police Force 130 Robinson R-44 Raven II surveillance helicopters at $515,900, using an exchange rate of N485.
This implies that each state across the country could get at least three of these modern equipment to fight insecurity.
Eventually, through aerial surveillance to support ground forces, it could help reduce the deteriorating state of insecurity in the country.
On the other hand, considering the ordeal of Nigerian farmers, especially women, who do not readily have access to mechanical farming equipment, a sum of N33 billion could procure 2,347 numbers of Mahindra tractors at N14 million each.
Under this provision, each of the states gets about 64 tractors that could be distributed to Local Governments Areas (LGAs) to aid large scale farming among rural farmers and ensure food sufficiency in the country.
Pipeline vandalism
Pipeline vandalism, which is a willful or deliberate act of destroying petroleum pipelines with an intention to steal crude oil and other associated products, is a menace that has continued to plague Nigeria’s oil and gas sector.
For years, crude oil and other petroleum products were being transported through extensive network of pipelines that run across different locations across the country right from remote to populated areas.
Unfortunately, for various reasons and diverse agitations, these networks are being attacked, thus causing several losses, environmental pollution and fire outbreaks among other dire consequences.
According to a publication by the United States Energy Information Administration (EIA) oil theft and vandalism caused severe pipeline damage, resulting in loss of production and pollution, while also forcing companies to shut in production.
For instance, from various terminals across the country, the FAAC report stated that incidences ranging from pipeline leaks, fire outbreak, community issues and maintenance, among other factors, affected production, leading to a cumulative production shut in and loss of over 40 million barrels of oil between January 2020 and same month in 2021.
Notable for shut-ins among the terminals are Forcados, Brass and Usan, among several others.
Also, the Nigerian Natural Resource Charter (NNRC) in its report ‘Oil Theft in Nigeria’ said the impact of crude oil theft beyond revenues lost to the government is an act of economic threat against the Nigerian state; it undermines development strategies and springs social disorder.
“While several estimates have been made regarding the cost to the national economy in lost revenues arising from crude oil theft, the cost to the environment of the Niger Delta (in terms of losses arising from damage and the costs of restoration) remain unknown, with estimates where available running into trillions of naira.”
“To me it is not only the remittances that are affected, it actually sends a wrong signal to investors,” says Wumi Iledare, Professor Emeritus in Petroleum Economics and former President, Nigeria Association for Energy Economics.
He opined that the spate of vandalism has reduced the amount of petroleum investments in the Niger Delta.
“Remember, it is not only NNPC that owns the crude oil that is being transported via the pipeline the same thing happens to the assets that are being destroyed. It is not solely owned by NNPC,” he added.
- ‘This story was produced under the NAREP Oil and Gas 2021 fellowship of the Premium Times Centre for Investigative Journalism’
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