Oil & gas: Tale of a castrated sector in 2013

According to the Nigerian National Petroleum  Corporation (NNPC), daily crude oil production of Nigeria in the first quarter of the year fluctuated between 2.1 and 2.3 million barrels per day compared with the projected estimate of 2.48 million barrels in the  2013 budget.
President Goodluck Jonathan said the country’s daily loss of crude oil is between 60,000 and 80,000 barrels valued at N1.5 billion, despite the establishment of the Joint Task Force (JTF) to check the unfortunate development.
Among the multinational oil companies operating in Nigeria, Shell suffered theft of large quantities of crude oil during the period which caused the company to declare force majeure in its major operations in the country. Its Trans Niger Pipeline (TNP) was shut various times within the period in view.
The corporation was embroiled in disagreement with the British-owned company over the $700 it claimed to have lost in the second quarter of the year to crude oil theft. The NNPC said the company’s figure was defective and not based on its operations in Nigeria.
But a United Kingdom based policy think tank said that crude oil theft in Nigeria has assumed an industrial scale since what is stolen is exported and its proceeds laundered through world financial centres and used to buy assets in and outside Nigeria.
“It is not clear how much of Nigeria’s oil is stolen and exported. The best available data suggest that an average of 100,000 barrels per day of crude oil vanished from onshore, swamp and shallow-water areas in the first quarter. This figure does not include what happens at export terminals,’’ it said.    
The group said the stolen product ends up in China, Singapore, Thailand, Gulf of Guinea, Indonesia, Ukraine, Kosovo, Bulgaria, Romania and Greece. The theft, it said, is perpetuated by Nigerians and aided by foreigners from Russia, the Philippines, Ghana, Georgia, Romania, Greece, Ukraine and Cameroon.
Multinational divestments
Divestment of assets of multinational oil companies in Nigeria, which started in 2010, reached its apogee during the period in view with torrents of auction of these assets to indigenous companies.
During the period, Shell disclosed  its intention to divest all its onshore and near offshore assets due to encroachment by oil thieves on the assets because they are accessible to the thieves.
It said: “Today, Shell’s 100 per cent-owned subsidiary, SPDC, announced the initiation of a strategic review, consultation with partners, and the potential exit from the interests it holds in some further onshore leases in the Eastern part of the Niger Delta, subject to partner and regulatory approvals. The SPDC JV produced around 750,000 barrels of oil equivalent (kboe) per day in 2012 from 28 Oil Mining Licenses (OMLs) across the Niger Delta, both onshore and in the near offshore’’.
Besides, the Anglo-Dutch company sold Oil Mining License 18, 24, 25 and 29 for onshore Niger Delta oil blocs with a combined production of 70,00 barrels per day of crude during the year. It will also dispose more assets in  Nigeria in 2014, according to its outgoing Chief Executive Officer, Peter Voser.
Chevron also puts on sale couples of its assets in the Niger Delta, while Conoco Phillips auctioned its own to Oando group at $11 billion. Petrobas, the Brazillian owned  multinational oil company, also sold 8 percent stake in offshore Agbami block, operated by Chevron, and its 20 percent share of the offshore Akpo  project at $5 billion.
Also during the year, a cumulative of 53.25 percent stake by three prime investors – British Gas (BG), Shell and Chevron was divested from the Olokola LNG project due to lack of government’s commitment and non-passage of the Petroleum Industry Bill.  
PIB passage not reality
The non-passage of the Petroleum Industry Bill (PIB), which is believed to have caused the country $37 billion investment, took a centre stage during the period in view.
There were disagreements between the northern and southern parts of the country on one hand and the federal government and multinational oil companies on the other over some provisions and fiscal policies contained in the bill.
The House of Representatives, which earlier held the federal government responsible for the delay of the 5-year-old bill, assured that it is vigorously harmonizing positions of various stakeholders with a view to producing effective petroleum law in the country.
Privatisation of refineries after TAM crisis
In 2013, the federal government budgeted N250 million to conduct Turn Around Maintenance (TAM) on the four refineries in the country. The government later announced that it will dispose the refineries to private investors in the first half of next year. It said Port Harcourt refinery is ready to be sold by December 30 because its maintenance has been completed.
The government constituted a steering committee for the sale of the refineries but the oil workers in the sector have threatened to shut the sector down on January 1, 2014 if government refuses to rescind the privatization of the assets.
Babatunde Ogun, President of PENGASSAN, said the exercise is ill-conceived as it will jeopardize the interest of oil workers and Nigerians in general.
During the year, the richest man in Africa and President of Dangote Group, Alhaji Aliko Dangote, proposed to build a 1.24 million barrels  refinery in Nigeria worth $3.3 billion. He said the project will end Nigeria’s importation of petroleum products by 2016.
Bid round of Marginal oil fields
The federal government also announced the commencement of second marginal field licensing round for the sale of 31 oil fields in the  country, 12 years after the initial exercise. A total of 16 oil fields on offer are located offshore while the remaining are in the continental shelf. The road show to sensitize prospective buyers of the assets is ongoing.
Besides, in 2013, drilling results revealed hope of commercial discovery in Oil Prospecting Licence (OPL) 310 and Oil Mining Lease (OML) 113.
Both assets are located offshore Nigeria and close to Lagos State. OML 113 interest holders include Yinka Folawiyo Petroleum (Operator), Vitol Exploration Nigeria, Chevron, P.R Oil and Gas and Lekoil. OPL 310 owners are Optimum, Afren Plc and Lekoil.
There were increased petroleum products supply in the country during the period in view, which lessened queues in filling stations in the country. There were some attacks on the products distribution channels like Atlas Cove.
Subsidy payments still an issue
The federal government paid N287 billion as verified claims to oil marketers in 2013, even though some are yet to receive their claims. It also reduced the number of oil importers in the country from 128 to 38. Marketers, who were indicted in the subsidy scam faced prosecution in various courts in Nigeria.
Besides, an agency of the federal government, Asset Management Corporation of Nigeria (AMCON) took over the management of companies like Capital Oil and Gas Limited and other oil firms due to their indebtedness to banks.
Others interesting issues
Mr. George Osahon took over the mantle of leadership of the Department of Petroleum Resources from a Mr Osten Olorunsola during the period
The federal government launched a gas revolution agenda in the sector in the last half of 2013. It said the agenda was designed to expand the nation’s gas supply which will cause unprecedented growth in Nigeria’s gas supply from one billion cubic feet per day by 2020.
The federal government admonished oil companies in the country to meet their gas supplies obligation to meet domestic demands including supplies to thermal power plants.
The government also announced that it is building pipelines for some of the power plants to ensure increased gas and power supply to feed Nigerians
Nigerian companies  increased their efforts to deepen consumption of gas as fuel by Nigerians. They include Dangote, Oando, NIPCO and Lagos State Government through the campaign for the use of compressed natural gas (CNG) and liquefied natural gas (LPG) by vehicles and households.
During the year, the Nigeria Liquefied Natural Gas Limited (NLNG) and the Nigerian Maritime Administration and Safety Agency (NIMASA) were engaged in serious dispute over payment of tax levies. NLNG lost over $525 million during the face-off.
Prospect for 2014
There is no doubt that rising cases of oil theft and pipeline vandalism is a low point of the nation’s quest to position the industry for global relevance. It is also disturbing that the act is becoming more pronounced few months to the nation’s general election.
The frequency of the theft would likely continue in 2014 if the Federal government is not proactive on how best to nip the development in the bud.
Already,the Federal government had admitted that the country might witness a downturn in crude oil export in 2014 due to large scale theft.
Lagos Chairman of Petroleum and Natural Gas Senior Staff Association of Nigeria(PENGASSAN),Reverend Foluso Oginni,is not optimistic that the oil and gas sector would fare better in 2014.
He said the fact that Nigeria has failed to find lasting solution to crude oil theft as well as embarked on infamous privatization of the nation’s refineries is a pointer to the fact that the country has missed the opportunity to chart a genuine path to grow the industry.
He also said that the Federal government’s body language on the Petroleum Industry Bill(PIB),suggests that it is not ready to hearken to the voices of reason to revolutionize the industry.
He also said the spate of divestment of assets by multinational oil companies would continue this year,a development which will jeopardize the interest of oil workers in the country.
Chief Executive Officer of Shoreline Energy International,Mr. Kola Karim,commended the reduction of queues in filling stations in the country and expressed that 2014 would be better in terms of products supply.
He sees divestment of multinational oil companies assets in 2013 as a boost to indigenous oil companies and said   the prospect for growth will manifest in 2014.
According to him, such growth will be premised on how well the Federal government manages the incidence crude oil theft and implements its policies in the sector.