A recent report by the Nigeria Extractive Industries Transparency Initiative highlights significant losses in Nigeria’s oil production, totaling 362.28 million barrels from 2014 to 2023.
These losses are attributed to factors such as measurement errors, sabotage, and production adjustments.
This loss translates to approximately 992,547 barrels of crude oil per day over the span of ten years.
This situation raises concerns about the efficiency and security of the oil sector, which is vital for the country’s economy.
NEITI disclosed this in its latest report titled, ‘Oil & Gas Industry Audit 2023: An independent report assessing and reconciling physical, process and financial flows within Nigeria’s oil & gas industry’, according to The Punch.
The agency also reported that during the review period, Nigeria experienced a total crude oil production deferment of 110.66 million barrels.
The report on crude oil losses was compiled by analyzing various sources, including submissions from the Nigerian Upstream Petroleum Regulatory Commission and finalized reports from companies like the Nigerian National Petroleum Company Limited.
NEITI refers to deferment as a stoppage in production due to scheduled and unscheduled repairs and maintenance, pipeline breaks/leaks, or poor equipment performance.
Nigeria, despite being an oil-producing nation, has struggled to fully leverage its oil and gas potential due to ongoing management challenges.
Issues such as inefficiencies, security concerns, and regulatory hurdles have hindered optimal production and revenue generation, highlighting the need for reforms to improve the sector’s performance.
This problem is worsened by the use of outdated and corroded pipelines for transporting crude oil.
The report further indicates a steady increase in crude oil losses in Nigeria, with the highest recorded loss of 101.05 million barrels occurring in 2016.
The losses recorded in 2017 were 36.46 million barrels of crude, meaning a daily average loss of 99,890 barrels. In 2017, crude oil averaged $54.32 per barrel, by implication, Nigeria lost $1.9bn to theft and sabotage.
The report read, “Crude oil loss was 7.68 million barrels which was 3.33 per cent of the total metered production at the flow station (7.675 million barrels) for the affected companies and crude type. The losses resulted from 2.910m million barrels measurement error (1.3 per cent), 5.252 million barrels theft and sabotage (2.3 per cent) and 486.746 thousand barrels production/terminal adjustment (0.21 per cent).
“Crude losses were 7.68 million barrels in 2023, compared to 36.69 million barrels in 2022. This dropped by 79 per cent (29.02 million barrels). This underscores the positive impact of government initiatives aimed at reducing crude oil losses, enhancing operational efficiency, and improving accountability within the sector.
“However, considering the proven crude oil reserves in the country, there is a need to ramp up production capacity to 2013 annual average of 800 million barrels through forensic audit of the wellheads and production platforms.”
To address the increasing crude oil losses, the agency recommended that the government explore viable public-private partnership arrangements to implement advanced digital solutions aimed at monetizing savings from these losses.
Additionally, it suggested the establishment of a centralized database to aggregate instances of petroleum product losses, which could help mitigate disruptions and enhance the overall availability of these resources.
It said, “The Federal Government through the NUPRC should consider viable public-private partnerships arrangement on the deployment of an advanced digital solution for the monetization of savings from crude losses.
“Also set up a special fund and a standby committee on crude loss prevention and security of oil and gas assets for a more coordinated response and intervention. The NMDPRA and stakeholders should accelerate actions to deploy a database and platform for aggregating cases of resource petroleum product losses that could disrupt the optimal availability of products.”
