Nigeria lost $48 million due to pipeline vandalism and theft of crude oil between January and June 2020, it was announced on Tuesday.
In addition, it became known that it is now almost impossible to stop the smuggling of crude oil across the country’s borders to neighboring countries.
This is even though the Federal government is demanding $ 2 billion to replace outdated pipelines from Excravos to Kaduna
Managing Director of the Nigerian national petroleum Corporation (NNPC) group, Melee Kyari, revealed them yesterday in Abuja.
In addition, yesterday, the Senate blamed direct deductions from the Nigerian national petroleum Corporation from the sale of crude oil.
Kyari spoke at an interactive session on the topic “Getting out of oil subsidies: ensuring self-sufficiency of domestic refining of petroleum products”, organized by the Senate Joint Committee on petroleum resources (Upstream and Downstream).
According to him, this year alone, the country lost about 48 million dollars of crude oil due to vandalism in pipelines.
He, however, said that this amount is lower compared to similar losses in the past.
According to him, in 2018 and 2019 alone, the country lost $825 million and $725 million, respectively.
The reduction, he said, was due to increased surveillance by law enforcement agencies.
He said pipelines are being destroyed within cities, not in the Bush, with the active connivance of security agents, security contractors and community leaders.
He said that the NNPC has decided to fully hand over the safety of pipelines to the security authorities “ ” it is their job to ensure the safety of state property.”
As for the smuggling of petroleum products across national borders, the GMD stated that the only way to stop this threat is to completely eliminate fuel subsidies.
Kyari added: “We don’t know how much oil we consume daily in this country, but we do know how much product is taken out of the depot.”
He said that about 54 million liters of petroleum products are extracted from warehouses every day, but their consumption is somewhere below this level.
He also said that the NNPC has no information about the number of products that are transported across national borders to neighboring countries.
“It’s impossible to know, no one is announcing it, and so when it crosses, it goes,” he said.
He added that the price of fuel at the borders is higher than the official exchange rate.
- There are open borders in the West African sub-region. It is impossible to stop cross-border deliveries of products. No amount of police or control that anyone can establish can stop this, ” he said.
He said the only way to stop food smuggling is to scrap subsidies so the sector can have stability.
He said that NNPC is working with CBN to stabilize the Forex market for everyone, so that marketers will access forex at the market rate and get the product at the market price.
He added that ” there have been several attempts to avoid subsidizing oil in the country’s history.
“Until March this year, there were no subsidies for aviation fuel, but we could not refuse subsidies for PMS.
“We have never seen such a collapse in prices in the history of oil. The price will drop from $ 50 per barrel to less than $ 10, and no country is ready for this. No one has seen his face. The result is a collapse in revenue, because there is a direct correlation.
“Today, in our efforts to ensure price stability in cooperation with the rest of the world, our daily crude oil production is 1.48 million barrels per day.”
He said that the oil giant cannot provide the 1.8 million barrels of oil per day that are provided for it in the revised budget for 2020, adopted recently by the National Assembly.
“We’re better off producing 1.7 million, and once the price gallops up to $ 45, we can make up the difference, ” he said.
He said NNPC deliberately closed three refineries because they were producing at a loss.
Kyari said: “There is a condition that we can extract only 70-80 percent of the cost of crude oil. There is no need to manage it when you know that you will lose 20% of the cost.
- Secondly, we can’t even guarantee the supply of crude oil through these lines.
“From Excravos to Warri and then to Kaduna; Bonnie to okrika, the pipelines are very old-some are 30 to 40 years old – and have not been replaced, and all the vandal activity that happens every day, if you put them under the pressure they are designed for, you can’t guarantee the required supply of crude oil if they are not replaced.”
“We haven’t done proper maintenance for the last 30 years, and the cumulative effect is that even when you start it today, it can’t work optimally.
“There is nothing you can do but replace the pipeline, and the cost of replacing it is very high. It takes at least $ 2 billion to replace the pipeline from Excravos to Kaduna, and we don’t have that kind of money.”
He insisted that the top two refineries, Warri and Port Harcourt, were producing just over 25% of their capacity when they were operating in 2018.
He said that $ 64 billion was spent on resuscitating the Kaduna refinery, but it still didn’t work.
“We have decided to completely close all oil refineries, ” he said.
However, he said NNPC was working with partners to fix the refineries.
According to the GMD, with the exception of the Port Harcourt oil refinery, which will be partially funded by public funds, since there is a provision for it in the 2020 budget, the other two plants will be fully funded by third parties.
He complained that even if the three refineries are operating, They can only produce 18 million liters of PMS per day, which, he said, is far below the 60 million liters that the group supplies each day.
“This means that the country will still be a net importer of PMS” ” he said.
Speaking about the need to build new refineries, GMD said that there are many firms that have received a license to build refineries, but were not able to do so
He added: “Why people don’t build oil refineries here is a very simple reason. When they process, how fast will they sell the product? Can they recover their costs? This is why no Bank will invest its money, and no one will start building oil refineries.
“The only way we can achieve this development is to maintain the market regime, or you assure them that when they produce, you buy a product from them at the price they want to put on the market. And this is not an option.
“We have the opportunity to allow the market to work. You will see activity in the subsector of the refinery when there is a complete cancellation of subsidies.”
Senator Sabo Mohammed, Chairman of the Senate joint Committee on petroleum resources (Upstream and Downstream), said in his speech: “Let me say that it is very depressing and disturbing that subsidy spending has soared by more than 210% in two months from an average cost of N774million a day in March 2018 to N2.4 billion a day in may 2018.
“The report shows that NNPC as the sole importer of petroleum products claimed N843. 12 billion and more N1trillion as recoverable in 2018 and 2019, respectively, against an average of about N511 billion per year for 10 years under the subsidy regime.
“These arbitrary and uncontrolled direct deductions in the name of not receiving revenue from the country’s crude oil without recourse to any enabling law are completely contrary to article 80 (1, 2, 3 and 4) of the 1999 Constitution (as amended).
“Let me ask your indulgence in this regard to point out that the NNPC law, which authorizes a Corporation to submit to the National Council of Ministers no later than three months before the end of each fiscal year an estimate of its expenditures and revenues for the next fiscal year,” does not negate the supremacy of the Constitution in matters of appropriations.
“The Constitution very clearly defines the role of the National Assembly in the appropriation of funds belonging to the Federation, and does not exempt anyone.
“The lack of control over the NNPC budget by the National Assembly makes its Supervisory role in the NNPC very difficult, if not almost impossible, and should be resolved as soon as possible.”