Nigeria losing 200,000 b/d to crude oil theft as sabotage grows: NNPC

Lagos — Nigeria is losing an average of 200,000 b/d of its crude oil production to theft, state-owned Nigerian National Petroleum Corp. said Feb. 25, indicating a surge in pipeline sabotage in the West African country.

The loss, which NNPC said resulted from sabotage attacks on pipelines and illegal pilfering by thieves, represents a quantum leap compared to the industry average of 70,000 b/d of crude output lost to theft as of August 2020.

"We have two sets of losses, one coming from our products and the other coming from crude oil. In terms of crude losses, it is still going on. On average, we are losing 200,000 b/d," NNPC managing director Mele Kyari said in Abuja, according an NNPC statement.

Kyari disclosed this when he held talks with the head of the Nigerian military Major Gen. Lucky Irabor, on ways to curb frequent attacks on pipelines and large-scale siphoning of the crude.

The NNPC chief said that while attacks on its key oil products pipeline network System 2B, mainly used to transport imported gasoline, had reduced considerably due to support from the security agencies, crude theft had become more prevalent.

Irabor pledged to increase military support to provide maximum security for Nigeria's oil and gas assets, according to the NNPC statement.

"It is my intention to cooperate maximally with you and to give necessary instructions to all officers in the Armed Forces," Irabor said.

Oil remains the driver of the Nigerian economy. Africa's top producer however, has lately seen its finances badly hit due to slump in crude and condensate production and lower prices in the international market.

Aging oil infrastructure

In 2019, Nigeria's oil industry auditor, the Nigeria Extractive Industries Transparency Initiative (NEITI), released a report showing that the OPEC member lost around 138,000 b/d of crude oil to theft over the past 10 years valued at $40.06 billion.

Producers have said costs continue to escalate in Nigeria due in part to attacks on facilities in the country's main producing region, Niger Delta.

Foreign oil companies, including Shell, ExxonMobil, Chevron and Total have linked their divestment in many onshore assets to the continued oil theft.

Nigeria's oil facilities have faced incessant sabotage attacks over the years while some others have aged, giving rise to frequent failures resulting in operational disruptions, high maintenance costs and revenue losses.

NNPC is currently scrutinizing bids from local and foreign investors to finance the construction and repairs of its crude oil and petroleum products pipelines.

It has also blamed the erratic performance of its four refineries, with combined nameplate capacity of 445,000 b/d, largely on the pipeline outages which cut crude supplies.

NNPC runs a network of over 5,000 km of pipelines across the country that transport both crude produced by foreign partners and also refined oil products that are imported.

Production lowest since 2016

Africa's largest oil producer saw its output fall steadily in the second half of last year as it came under pressure to make hefty cuts as part of its OPEC+ obligations.

Nigeria has the capacity to produce around 2.2 million b/d of crude and condensate, but it pumped around 1.72 million b/d in 2020, according to S&P Global Platts estimates.

That is the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing production to as low as 1.4 million-1.5 million b/d that year.

Militancy in the Niger Delta remained largely dormant in the past few years. But the security situation in the Niger Delta remains fraught as history has shown conflict in the.

President Muhammadu Buhari has been managing militancy in the restive Niger Delta by continuing amnesty payments, and this will continue into 2020, according to the country's budget.