Business & Economy - News - Oil & Gas - May 30, 2022

Crude oil theft: Why Nigeria’s unable to meet her oil output capacity – NUPRC

By Bassey Udo

Despite Nigeria’s current potential to produce the technically allowable capacity of about 2.3 million barrels of crude oil per day, the country is able to realise only 1.9 million barrels, or 82.6 percent, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has said.

Yet, the upstream petroleum industry regulator says only about 1.35 million, or about 71 percent of the 1.9 million barrels get to the crude oil export terminals due to massive crude oil theft and pipeline vandalism.

Consequently, the Chief Executive Officer of the Commission, Gbenga Komolafe, cites these twin menaces as reasons the country has not been able to meet her crude oil output capacity.

Komolafe disclosed that the country lost about N434 billion to crude oil theft in the first Quarter of 2022 alone.

Speaking at the Iwereland Petroleum Communities Summit on the implementation of the Host Communities Development Trusts in oil producing Itsekiri communities under the Petroleum Industry Act 2021, Komolafe said out of about 141 million barrels of crude oil the country produced during the period, about nine million barrels was lost to crude oil theft.

The NUPRC CEO said at the event hosted by the Olu of Warri, Ogiame Atuwatse III, that the loss translated to about $1billion in revenue the government should have earned from crude oil exports.

At the prevailing price of an average of about $116 per barrel at the International crude oil market, and an official exchange rate of N415 per dollar, the loss sums up to about N434 billion.

“While the Commission is prioritizing efforts towards increasing oil and gas production and ensuring maximum economic recovery in Nigeria through the optimisation of oil and gas value chain, there have been challenges limiting the country from making the much-desired progress,” Komolafe said.

Nigeria is ranked second and eighth, in terms of crude oil reserves, as well as first and seventh in crude oil production in Africa and among members of the Organization of Petroleum Exporting Countries (OPEC) respectively.

Globally, Nigeria is 11th in crude oil reserves and 15th in crude oil Production.

The NUPRC boss lamented that the loss could have been available for development of social projects like hospitals, schools, roads, provision of electricity and potable water, to improve the quality of life of the people.

Beyond the loss in revenue, he said the sabotage of oil and gas facilities has resulted in additional remediation cost to the government as well as environmental degradation from from oil spills, soil and water pollution, threat to human life, source of livelihood, wildlife and marine life (fishes) and crops.

These losses, he said, underscored the need by the government to optimize oil and gas resources development and production through the passage to law of the Petroleum Industry Bill (PIB) after more than 20-years.

To assuage the oil producing communities and give them a sense of belonging in the exploitation of the crudd oil, Komolafe said the enactment of the Petroleum Industry Act 2021 has opened new opportunities in the country’s oil and gas industry, with extensive provisions to foster sustainable prosperity of host communities and enhance peaceful and harmonious co-existence of oil companies with their host communities.

Section 235 of the Act, he said, specifically provides for the incorporation of Host Communities Development Trust (HCDT) by the Settlors (the oil and gas companies) for the benefit of the host communities.

Although the responsibility to set up HCDT and appoint the Board of Trustees was vested in the companies in consultation with the host communities, he said Section 247 of the Act requires the Board of Trustees to set up a Management Committee to handle the general administration of the Host Communities Development Trust Fund.

Besides, he said the Management Committee was required to in turn to set up an Advisory Committee to advise on activities, monitor and report progress of projects in the community to the Management Committee.

In addition, Komolafe said the law provides that the host communities should be represented in the Board of Trustees, Management Committee and Advisory Committee, while Section 235(6) empowers the NUPRC to “make regulations on the administration, guide and safeguard the utilization of the trust fund and have the oversight responsibility for ensuring that the projects proposed by the Board of Trustees are implemented”.

He told the meeting that the Commission had concluded arrangements to ensure the regulations guiding the implementation of the host community development fund under the PIA 2021 came into effect before the end of June 2022.

The development, he said, would signal the commencement of seamless implementation of the host community development fund for the benefit of oil producing communities.

Consequently, he said the Commission, which is empowered by the PIA, would focus on working with the host communities and other stakeholders to ensure business investments in the oil and gas sector were adequately protected, while ensuring the safety and sustainability of the environment.

Komolafe promised that the Commission was committed to ensure that the 3 percent deduction required from the Settlor’s annual operating expenditure (OPEX) was not shortchanged and that funds were remitted in good time.

“We shall also ensure that projects and programmes proposed by the HCDT are implemented as well as ensure fair and adequate compensation for damaged environment and apply sanctions where necessary on defaulters,” he said.

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