Page 5 - DMEA Week 40 2022

DMEA COMMENTARY DMEA

The anti-theft operations led to the seizure and Meanwhile, all of these disruptive events
shutdown of many illegal facilities, he said. have happened ahead of Nigeria’s next presiden-
“We have deactivated 395 illegal refiner- tial election, which is scheduled to take place on
ies. We have taken down 273 wooden boats. February 25, 2023. As such, the current govern-
We have destroyed 374 illegal reservoirs. We ment has a stake in stabilising the economy so
destroyed 1,561 metal tanks,” he told members that the All Progressives Party (APP), the faction
of the committee. “We have seized over 49 trucks led by the incumbent President Muhammadu
and burnt them down. We have discovered ille- Buhari, can remain in power. (Buhari himself
gal oil pits [numbering] 898 so far, and 1,219 is in his second term and cannot seek re-elec-
cooking sites have been taken down.” tion.) Moreover, much of the disruption is hap-
Kyari also reported that security forces had pening in the southern part of Nigeria, which The Buhari
discovered a 4-km pipeline running from the has long-standing grievances against the federal
Forcados terminal to the sea. This link had government. administration
apparently been operating illegally, without the
knowledge or interference of Nigerian authori- Short-term implications will continue
ties, for the past nine years, he said. So what does all of this mean?
He did not say how crude the pipeline to the On the one hand, it indicates that the Buhari to focus on
sea had been siphoning away from the terminal, administration is concerned enough about oil pipeline theft
which typically operates below design capacity, production and revenues that it will continue to
handling around 250,000 bpd. Reuters com- focus on the issue of pipeline theft in the run-up in the run-up to
mented, though, that the illegal hookup showed to the presidential election. Kyari can, therefore,
signs of being more sophisticated than the usual be expected to make many more such speeches the presidential
breaches employed by small-scale onshore bun- to Parliament over the next few months.
kering operations, meaning that it might be part On the other hand, though, the success of election
of a more complex criminal arrangement. the administration’s efforts may depend partly
In any event, the NNPCL chief sounded on whether it can clear up the disruptions in the
the alarm, saying that pipeline theft was on the fuel market and eliminate dependence on fuel
rise. “Oil theft in the country has been going on importance by the end of 2023 as promised.
for over 22 years, but the dimension and rate it And that will hinge on the outcome of efforts to
[has] assumed in recent times is unprecedented,” restart NNPCL’s four idle refineries and launch
Kyari told members of the Senate committee. the Dangote Refinery, a massive privately owned
plant that will have a capacity of 650,000 bpd.
Lower production, less money The next test of this proposition is coming up
Kyari’s frustration is hardly surprising, given that soon, as the Nigerian government said in Sep-
the government is blaming oil theft for Nigeria’s tember that it was certain that NNPCL’s Port
plunging oil production. In August of this year, Harcourt plant would come back on line before
the country saw yields dip below 1mn bpd for the end of the year. ™
the first time in more than 30 years. This is at
least 70% down on the output levels reported at
the beginning of 2020, according to data com-
piled by OPEC.
It is also far below the October 2022 pro-
duction quota of 1.82mn bpd that the OPEC+
group set for Nigeria. (Indeed, Nigeria has been
unable to produce the full amount allotted for
some time, quite in contrast to its past history of
habitual quota-busting.)
This year’s disruptions in production and
exports have had consequences beyond mere
numerical targets. They have also happened at
a time when global crude oil prices have been
running high as a consequence of the conflict
between Russia and Ukraine. As such, they have
reduced the amount of money that NNPCL and
the Nigerian government have been able to earn
from high oil prices.
For Abuja, this is quite unfortunate. The
constraint in earnings has coincided with wide-
spread shortages and disruptions in fuel sup-
plies, as well as increases in the prices of food
and other basic goods. It also followed closely
on the government’s decision to defer its legal
obligation under the Petroleum Industry Act
(PIA) passed last year to phase out domestic
gasoline subsidies and continue keeping prices
artificially low for another year and a half, at a
price of almost NGN 7 trillion ($16.14bn). Black-market fuel seller in Abuja (Photo: Twitter/@nmdpratweets)

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