A combination of perennial problems such as under-lifting of crude oil, unprecedented crude theft and years of underinvestment is causing more pain to Nigeria’s oil and gas sector at such an unprecedented pace worrisome enough to threaten the country’s economic health.
Africa’s biggest economy is struggling with dwindling earnings that is pushing her to borrow to the hilt so much so that she spent more money repaying creditors than she earned in the first four months of 2022. That simply means she had to borrow even some more to be able to repay interest on outstanding debt.
Despite these challenges, data gleaned from the Nigerian National Petroleum Company Limited 2021 financial statement showed crude oil worth N291.913 billion was not lifted between 2020 and 2021.
An underlift occurs when a company fails to take its full share of production for the period under review.
Further findings showed the oil fields affected with crude oil of underlifting includes Oil Mining Leases (34, 24, 40, 40, 65, 4,38, 41, 119, 42, 26, 111 and 60-63).
The above development means that for the apportioned quota for these Joint Venture companies who are partners under the NNPC Group and operating the Oil Mining Leases across the eleven fields did not lift their entitled production quota for the year in full quantum.
Experts believe the companies’ inability to lift their full apportioned portion of crude Oil, may not be unconnected with the continual fall in Nigeria’s production level. The fall has been constantly blamed on sabotage and vandalisation of pipelines.
Companies’ inability to lift their own share of crude oil has an impact on the immediate revenue available to the NNPC Ltd.
Nigeria slipped behind Angola as Africa’s largest exporter in July, according to OPEC figures. Both countries are also dealing with years of low investment that have impinged production.
However, Nigeria’s case is peculiar. The country’s highest crude and condensate output this year, recorded in January, was 1.68 million bpd, though the country has the capability to export close to 2 million bpd.
Operators say the failure of the Federal Government to implement in full the provisions of the PIA, uncertainties caused by oil theft, and a face-off between the presidency and regulatory agency have worsened situations for a sector in desperate need of private investments.
“Unlike its state-owned counterparts Saudi’s Aramco, the former NNPC had a structure that largely depended on government funding thus making it less competitive and less attractive to global investors, especially international oil companies who were uncomfortable doing business with the corporation due to fears of undue government influence, grotesque policies and unnecessary bureaucratic delays,” lawyers at Centurion Law Group said in a note.