Execution of Nigeria’s N8.916trn budget under threat from oil pipeline shutdowns
Barely two weeks after the National Assembly passed the N8.916 trillion budget for 2019, the implementation of the financial plan is already being threatened by the spate of vandalism of oil pipelines across the country.
Nigeria has set oil production target of 2.3 million barrels per day (mbpd) at a price benchmark of $60 to support the 2019 budget. The development has led to force majeure (a legal way of cancelling or delaying deliveries over unforeseen situations) by International Oil Companies (IOCs) that threatens the nation’s revenue that is over 90 per cent dependent on oil exports.
Inflows of foreign exchange, which were pegged at N305/$1 in the budget are also threatened even as lives and the environment of the host communities remain endangered.
Although the Nigerian National Petroleum Corporation (NNPC) could not comment on the crude export losses due to shut-ins, it had earlier revealed that pipeline sabotage was on the rise and posed a critical challenge to the economy and environment.
Shell and Total last week declared force majeure over vandalism that affected the Nembe Creek Trunk Line (NCTL), and technical hitches at Amenam-Kpono field. And only yesterday, The Aiteo Group announced another shutdown of the oil pipeline barely 24 hours after being reopened.
On the NCTL pipeline alone, revenue projection of over $10 million (about N3 billion ) is being lost, considering that 150,000 barrels of crude are transported daily through the line at the price of $70.61 per barrel, based on Monday international market price.
The Spokesperson for Aiteo, Ndiana Matthew, said the pipeline suffered two new leak points near Awoba in River State.
Fire outbreak was reported on the line in the past week, forcing the organisation to shut in injection as well as other related operations on the NCTL.
The group blamed the fire incident on an illegitimate and third-party breach of the functionality of the pipeline, adding that the repair of the affected areas was conducted before it was reopened.
The Nembe Creek Trunk Line, a 97-kilometre, 150,000 barrels of oil per day pipeline, which was constructed by Royal Dutch Shell Plc and was later sold to Aiteo Group, is one of Nigeria’s major oil transportation arteries that take crude from the Niger Delta to the Atlantic coast for export.
In January alone, NNPC recorded no fewer than 230 cases of pipeline vandalism.
A breakdown indicated that Mosimi-Ibadan, Ibadan-Ilorin and Aba-Enugu pipelines accounted for 67, 62 and 30 points, which translated to 29 per cent, 27 per cent, and 13 per cent of the vandalised points.
The Warri-River Niger axis accounted for 10 per cent, and other locations accounted for the remaining 21 per cent of the pipeline breaks.
Reuters had reported that the Bonny Light exports had been planned at 222,000bpd in June and 184,000bpd in May, as trading sources said they were awaiting new loading plans.
But the agency, quoting a source, said that oil-well shutdowns had reduced Amenam’s daily production, and led to force majeure. Exports of Amenam are typically around 100,000bpd, and trading sources said loadings had been delayed by roughly 25 days.
Admitting to the environmental danger, Matthew said emergency response process had already been initiated to limit the oil spread on bodies of water whilst efforts to identify the cause of the incident/repair had also been initiated.
“Consequently, all injectors have been advised in accordance with NCTL shutdown procedure to shut in the production into the NCTL immediately. Appropriate oil leakage/spillage notification report will follow shortly from the Department of Petroleum Resources (DPR) and the National Oil Spill Detection and Response Agency (NOSDRA),” he stated.
Aside from the pipeline breaks, Aiteo has also alleged that its operations as well as revenues, and the Federal Government are being restricted by the local communities in Bayelsa State.
The company said a section of the Nembe community had converged, without prior notice, and barricaded the entrance to Aiteo’s logistics base, interrupting normal work operations and ignoring the intervention of the state security taskforce.
Although protracted engagement with them led to a resolution, Matthew, in a statement, said: “These disturbances disrupt our operations and lead to production deferment, which affects not just the company, but revenues accruing to the government and people of Nigeria.”
He reiterated Aiteo’s commitment to working with the host communities to achieve an amicable relationship, noting that the Nembe community provides most of the supply, logistics and security contracts going into local operations.