Oil & Energy
Crude Theft, A Rape On Nigeria’s Economy
It is mostly referred to as oil bunkering while at other times the adjective “illegal” is added to make it explicit. But what aptly describes this act is “Theft” though still on a mild note considering how dastardly the act is.
Crude oil theft in Nigeria has been on the increase as it is estimated to have caused the country to lose about $7 billion (N1.13 trillion) annually. An average of about 150,000 barrels of crude oil per day is said to be stolen through pipelines hacking at different locations and varying sizes of ships are used to convey it to international market and sold there at a rather cheaper rate.
Journalists were earlier this year taken on a helicopter overfly across the Tora Mainfold, Santa Barbara River, SEGO Bille, Cawthorne Channel and Alakiri all in Rivers and Bayelsa States to confirm the thriving crude oil theft activities taking place at these locations.
“It is difficult to sustain production in the circumstances as we to have to shut down when a facility trips and fix the cause before restart. This happened three times just between the 26th and 30th of January”, an operator of the line explained to newsmen during the overfly.
Buttressing the number of barrels lost to these organised criminals, Shell’s Executive Vice President, Sub-Saharan Africa, Ian Craig told his audience during a technical session at the last Nigerian Oil and Gas Conference (NOG) that this incidence is at present costing Nigeria about 150,000 barrels of crude oil daily. This calls for concern as the neighbouring Ghana with its 120,000 barrels daily per day is making robust plans towards national development with enthusiasm while Nigeria is losing well over 120,000 barrels to oil thieves and no drastic action is taken.
In the same vein, Mrs Diezani Allison-Madueke, the Minister of Petroleum Resources, had at a stakeholders’ meeting in Lagos raised an alarm saying about $5 billion (N810 billion) was spent in the last one year on pipeline repairs culminating to about $12 billion (N1.9 trillion) lost to oil thieves. A whooping amount such as this would have gone along way to address the pressing infrastructural development challenges that are affecting the growth of the economy if the menace is given the required attention.
It was reported recently that over 200 vessels were transacting illegal business on our territorial waters.
According to a top security official the report said these 200 vessels engaged in oil bunkering, illegal fishing, piracy and sea robbery among other vices.
And of course this nefarious activities are perpetrated by some unscrupulous Nigerians in connivance with some foreigners who infiltrate our territorial water ways.
In this colossal loss, the worst hit among the multinationals operating in the country is Shell, the nation’s largest upstream operator. The firm’s footprints traverse all parts of the Niger Delta region being the first oil major to begin exploration and exploitation of crude in the region.
Addressing media Executives in Port Harcourt Shell’s manager, Government & Community Relations, Fufeyin Funkakpo explained that the firm’s operations were divided into two regions; East and West using a river in the middle to dissect the operational regions.
According to Funkakpo the first is the Trans Niger Pipeline (TNP) which begins from Bonny Island cutting across Rumuekpe, Bayelsa, Egbema, Ebubu to Ogoni areas to Bomu and back to Bonny like a loop.
The second, he explained further is the Nembe Creek Coastal Trunkline (NCTL) that connects the flow stations in the Nembe areas through the famous Cawthorne Channel and ends in Bonny. The crude oil that accounts for 95 per cent of foreign earning which sustains 80 per cent of the national budget is mostly carried by the two pipelines.
These pipelines are regarded as the nation’s economic arteries as they help Nigeria to generate a GDP of $415 billion positioning it as the world’s 31st largest economy.
The nation’s foreign reserves which grew to $36 billion in the past year is attributed to these pipelines. This two livewires of the nation’s economy are the ones that are constantly under the attacks of oil thieves and whenever this rape was brought before the public domain government seems to turn deaf ear to it.
It is gathered that it has taken numerous steps to save these economic livewires of the country including the decision of the federal government to set up the JTF to the firm’s mulling the idea of technical solutions through pipeline alerts.
This, however, seems not to have yielded the desired fruits, as the Anglo-Datuch group, said last week that it may not meet the contractual obligations on certain exports from Nigeria because of theft and damage to key pipelines in the Niger Delta region.
Shell’s Nigerian joint venture (SPDCJV) declared force majeure on Bonny and forecados according to a statement by the company.
“Bonny loadings are affected as a result of production deferment caused by the fire incident on bunkering ship on the Bomu – Bonny Trunkline and production deferment from a third party producer because of flooding”, the statement said.
The firm noted that export from forcados were affected by damage caused by suspected bunkering on the trans forcados pipeline and the Brass creek trunkline.
Beside illegal bunkering, there is the official theft where it is alleged that Expert clearance Permit are fabricated.
According to a report, crude oil worth $1.6 billion with fabricated Export Clearance Permit was reported to be allegedly exported by the Nigeria National Petroleum Company (NNPC).
A letter to the President which was attributed to Dr. Olusegun Aganga said a forged crude oil and gas Export Clearance Permit, No: CO/28/Vol.V111/09 that was purportedly issued by the Federal Ministry of trade and Investment to NNPC for shipment of 24 million barrels of crude oil and gas in the third quarter (July to September) 2012 was discovered.
The Minister explained that the matter was officially reported to the office of the Economic and Financial crimes commission (EFCC) for investigation and it was revealed during investigation that one of the permits was forged as it was not issued from his office and did not bear the security features that were built into the original permit forms.
Although, the management of NNPC dissociated itself from the allegation and described it as false and baseless.
NNPC said in a statement signed by the acting Group General Manager Public Affairs of the Corporation, Mr. Fidel Pepple, that all crude oil and gas exports by it follow a rigid and established guideline.
“We have always and continued to follow existing requirements for exporting crude oil and gas from the country. The process is complex and involves the Ministry of trade and Investment, the Ministry of Petroleum Resources, the DPR, and the Nigerian Customs Service”, Pepple noted.
Also worrisome is the high level of frauds going on in the oil and gas industry.
A recent report by the Petroleum Revenue Special Task Force headed by Nuhu Ribadu revealed that Nigeria has lost out on tens of billions of dollars in oil and gas revenues over the last decades from cut price deals struck between multi-national oil companies and government officials.
The committee which was set up by the Minister of Petroleum Resources, Mrs Diezani Allison-Madueke in a confidential 146 – page report provided new revelation on the long history of corruption in the industry and highlighted that ; “Nigeria loses out on $29 bn on cut-price gas deals; state-oil company sells itself cheap oil and gas; oil ministers hand out discretionary oil licences; hundreds of millions in missing bonuses, royalties; traders buy crude oil without formal contracts.”
The report concluded that oil majors, Shell, Total and Eni made bumper profits from cut-price gas, while Nigerian oil Ministers handed out licences at their own discretion. This, while not illegal, did not follow best practice of using open bids.
Hundreds of millions of dollars in signature bonuses on those deals were also missing, the report said.
Oil & Energy
Savannah To Take Over Stubb Creek Field in Nigeria
Savannah Energy PLC has signed agreements to take over Sinopec International Petroleum Exploration and Production Company Nigeria Ltd. (SIPEC), the British company’s co-venturer in the Stubb Creek oil and gas field in Nigeria, for $61.5 million.
SIPEC owns a 49 percent interest in the proven onshore asset in the Akwa Ibom State, which sits on the southern coast of the Western African country.
Savannah affiliate Universal Energy Resources Ltd. operates Stubb Creek with a 51 percent interest.
London-based Savannah, in a Press Release, said it has now inked separate share purchase agreements (SPAs) with the Chinese and Nigerian owners of SIPEC—Sinopec International Petroleum Exploration and Production Corp. (SIPC) and Jagal Ventures Ltd., the completion of which will result in Savannah taking full ownership of Stubb Creek, SIPEC’s principal asset.
“The SIPC SPA will see Savannah Energy SC Limited (a wholly owned subsidiary of Savannah) acquire a 75 percent equity interest in SIPEC for cash consideration of US$52 million, payable on completion and subject to customary adjustments for a transaction of this nature from 1 September 2023.
“The Jagal SPA will see Savannah Energy SC Limited acquire a 25 percent equity interest in SIPEC for cash consideration of US$7.5 million (without adjustment), payable on completion, plus US$2 million in deferred cash consideration payable in eight equal quarterly installments post-completion”, it stated.
Savannah simultaneously released an independent analysis showing gross proven and probable (2P) oil and condensate reserves of 11.9 million stock tank barrels (MMstb), as well as a gross best contingent gas estimate (2C) of 515.3 billion cubic feet (Bcf), in Stubb Creek as of January
It also holds an 80 percent interest in Accugas Midstream Business, which owns and operates the Uquo central gas processing facility and 260-kilometer (161.6 miles) pipeline network. The processing facility has a declared capacity of 200 million cubic feet a day.
SIPEC meanwhile had an estimated 8.1 MMstb of 2P oil reserves and 227 Bcf of 2C gas as of yearend, while its oil production is estimated to average 1,400 barrels per day (Kbpd) this year.
“Savannah’s Reserve and Resource base will increase by approximately 46 MMboe [million barrels of oil equivalent] following completion of the SIPEC Acquisition.
“It is anticipated that, within 12 months following completion of the SIPEC Acquisition, Stubb Creek gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking program”, it said.
Oil & Energy
NNPCL Lists Transparency, Accountability, Others, As Transformation Drivers
The Executive Vice President, Gas, Power and New Energy, Nigerian National Petroleum Company Ltd, Olalekan Ogunleye, has identified transparency, accountability, research, technology and innovation as key drivers of the ongoing transformation in the company.
Ogunleye disclosed this while speaking during a Panel Session hosted by the NNPC Ltd at the ongoing 2024 CERAWeek Conference in Houston, the United States.
Ogunleye, whose session addressed the theme, “Africa’s Energy Future: Access, Investment & Sustainability”, said under the current leadership of Mr. Mele Kyari, the Company has institutionalized the use of modern technology to drive its operations, a development that has created tremendous value for the company in its quest to compete with its global peers.
He said with the coming of the Petroleum Industry Act (PIA) in 2021, NNPC Ltd has today transformed into an integrated commercial entity that is focused on transparency and accountability, two core values that are vital towards the Company’s quest to float an Initial Public Offer (IPO) at the stock exchange.
“Over the last five years, the NNPC Ltd has been pushing the agenda of transparency, accountability and performance excellence. I am glad to say that we are setting very high standards, and this is a journey that we are all committed to going forward”, Ogunleye stated.
He further observed that transparency and accountability have a commercial component to them, because they can make any organisation attractive to its partners and potential investors.
He said currently, the NNPC Ltd is working assiduously to become IPO-ready, stressing that once that is done, the IPO would be phenomenal and successful.
Ogunleye, who described the future as exciting for the NNPC Ltd, said as the biggest energy company in Africa with the biggest resources and largest market, the Company remained committed to delivering value to its shareholders by relentlessly improving its processes in line with global best standards.
He said gas would continue to be an important resource for Africa because it is the surest tool for economic development and for delivering better living standards for the teeming population on the continent.
Ogunleye called on all gas players to sustain the advocacy for gas as a major energy source that will be utilised to develop the economic and industrial fortunes of the continent.
According to him, gas is a top priority for NNPC Ltd because the Company is at the forefront of Nigeria’s gas commercialization efforts and flare elimination.
“Gas has come to stay. It is going to be part of the energy mix for us in the long term. We shall continue to be at the forefront of accelerating gas development and commercialisation in Nigeria”, he added.
Oil & Energy
Africa’s Energy Leap From Fossil Fuels To Renewable Powerhouse
The African continent is at a critical turning point. The region’s energy demand is set to skyrocket, just as climate change is starting to impact local livelihoods in earnest.
African countries are among those most vulnerable to climate change despite having contributed the least to the climate crisis.
Faced by a sharp population growth, and a need to develop local and national economies, Africa also must simultaneously contend with the urgent imperative to keep emissions in check. It’s a tall order.
Indeed, Africa is a perfect example of what is known as the energy trilemma: the tricky problem of creating enough energy while also keeping that energy sustainable and affordable.
What makes Africa’s situation so unique and so dire is the intense scale of each of these trends. The continent has some of the most underdeveloped energy grids on the globe, and is also facing the biggest population boom anywhere on Earth.
Africa has the fastest growing population in the world, expected to double between now and 2050. This means that, by midcentury, a quarter of the global population will be in sub-Saharan Africa. This presents a massive energy and infrastructure gap in the coming decades.
Currently, about 600 million people across Africa completely lack access to electricity. Furthermore, for a great many of those who do have access, it is not reliable or stable, as power failures and rolling blackouts are a common occurrence.
Such intermittent electricity is common in urban areas, while in rural areas establishing any form of grid connectivity can present a major challenge.
African energy demand is expected to increase by a third over the next decade as sub-Saharan Africa grows, develops, and industrializses.
To meet this demand, power generation capacity will have to increase by a factor of 10 by 2065. But to advance toward such goals without breaking climate pledges and more generally counteracting global progress toward decarbonization, Africa has to “leapfrog” over what is normally the next phase of development in a poor nation’s economic journey.
Unlike other nations in history which have enriched themselves and developed their economy by burning massive amounts of cheap and abundant fossil fuels with abandon, countries developing now do not have the same option.
Luckily, Africa is a goldmine of potential renewable energy resources.
“The continent is extremely rich in natural gas (considered to be a stepping stone away from dirtier fossil fuels like coal and oil), as well as abundant sunshine, wind, and highly sought-after rare Earth minerals such as lithium and cobalt which are essential components of renewable technologies including photovoltaic solar panels and lithium-ion batteries for electric vehicles and renewable energy storage”, Oilprice reported in July of 2023.
It’s just a matter of securing sufficient investment, fostering a supportive political environment, and establishing trans-national intra-African energy sharing agreements to be able to tap all of that green energy potential. If managed properly, clean energy could benefit the African economy enormously while helping to solve the riddle of the energy trilemma.
According to a new database of planned and installed renewable energy capacity across Africa, the continent is well on its way to achieving its ambitious energy “leapfrogging” goals.
In fact, figures show that if all planned additions are carried out without issue, some African nations could totally decarbonize by midcentury.
The Renewable Power Plant Database Africa, built by a renewable energy scientific modelling team from Rwanda and Germany, is the first comprehensive overview of renewable energy plants in Africa to include key details such as their geographic coordinates, construction status and capacity (in megawatts), allowing for more accurate and sophisticated modelling.
Such modelling shows that some of the countries with the most advanced renewable energy sectors and plans (such as Nigeria and Zimbabwe) already have enough clean energy projects lined up to conceivably transition away from fossil fuels as soon as 2050.
Furthermore, 76% of Africa’s electricity demand could be supplied by renewable sources by just 2040 in a scenario in which all clean energy plants in the pipeline are built as planned, and existing hydro-, solar and wind power plants are used to their full capacity.
This 76% would be composed of 82% hydropower, 11% solar power and 7% wind power.
However, the heavy dependence on hydropower in the short term is not a good long-term solution as periods of drought pose serious energy security risks.
“We conclude that combining the advantages of hydropower with wind and solar would be a more sustainable alternative to hydropower alone”, the Database team states, adding, “And that hybrid solutions would be the best option’.
Despite Africa’s many challenges, it stands to be one of the most important players in the global energy industry going forward. Its climatic and ecological characteristics and relatively low population density compared to other key regions gives it a major advantage as a hydro, wind, and solar powerhouse.
If built out according to plan, its clean energy output will be formidable. And as the continent develops, its massive workforce could make it a clean energy manufacturing source to reckon with.
Zaremba writes for oilprice.com concessional and semi-concessional.
By: Haley Zaremba
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