Nigeria has suffered a shortfall of N191billion ($1.23 billion) in the first quarter of 2013, due to drop in crude oil production.
The Nigerian National Petroleum Corporation (NNPC), attributed the drop in production to crude oil theft and the vandalism of major oil pipelines in the oil-rich Niger Delta region.
The NNPC explained that daily oil production within the period fluctuated between 2.1 and 2.3 million barrels per day (mbpd), compared with the projected estimate of 2.48 mbpd.
According to NNPC’s spokesperson, Ms. Tumini Green, “Expectedly, this fall between actual production and forecast in the first quarter of 2013, has resulted in a drop in crude oil revenue of about $1.23 billion (N191 billion) that should have accrued to the Federation Account.”
She also said that due to crude oil theft, the NNPC/SPDC joint venture recently declared a force majeure on Bonny crude. This resulted in the shutting in of 150,000 bpd.
“Investigations showed that 53 break points were discovered along the 97 kilometre Nembe Creek trunkline. Repair work is expected to last about six weeks… We shall continue to work with relevant government agencies both at the federal and state levels to end this incessant crude oil theft and pipeline vandalism. We have the potential to meet the national target of 2.48mbpd if this menace is eliminated,” she said.
The NNPC spokesperson further noted that crude oil theft and pipeline vandalism would continue to degrade the environment, increase operational costs, impact negatively on the image of the country, and reduce revenue accruable to the country.
Crude oil receipts
In the last quarter of 2012 – October to December, Nigeria was estimated to have lost about N426 billion ($2.7billion) from decline in crude oil production. A Central Bank of Nigeria, CBN Fourth Quarter Economic Report, attributed the decline to natural disaster, oil theft and sabotage to oil infrastructure during the period under review.
As a result, Nigeria’s oil revenue in the fourth quarter of 2012 dipped by N112.6 billion, as gross oil receipts in the Federation Account stood at N1.824 trillion, dropping by 5.8 per cent from N1.936 trillion recorded in the third quarter of 2012.
The CBN data put Nigeria’s crude oil production, including condensates and natural gas liquids at 2.00 million barrels per day (mbd) or 184.00 million barrels during the fourth quarter of 2012, compared to the 2.26 mbpd or 207.92 million barrels recorded in the third quarter, representing a decrease of 0.26 mbd or 11.5 per cent in production level.
The report pegged the average price of Nigeria’s reference crude, the Bonny Light at $112.73 (N17,811.34) per barrel, with crude oil export at 1.55 mbd or 142.60 million barrels in the fourth quarter, compared with 1.81 mbd or 166.52 million barrels in the preceding quarter, representing a decline of 14.4 per cent.
Crude allocated for domestic consumption in the period under review was valued at $4.667 billion or N737.386 billion, while actual allocation of crude oil for domestic consumption was put at 0.45 mbd or 41.40 million barrels.
Loses N64bn to production decline
Nigeria lost a total of $399 million (N63.84 billion) in the month of April, due to decline in crude production and export, according to data obtained from the Central Bank of Nigeria, CBN.
Specifically, the CBN Economic Report for April 2013 said the country lost $304 million (N48.64 billion), following a 1.5 per cent dip in crude oil production and another $95 million (N15.2 billion), following a decline in crude export.
Using an estimated average of US$105.68 per barrel for the month, the report said Nigeria earned $6.246 billion (N999.36 billion) from crude oil production in April, compared with $6.55 billion (N1.048 trillion) earned in March.
According to the report, Nigeria’s crude oil production, including condensates and natural gas liquids, was estimated at an average of 1.97 million barrels per day or 59.10 million barrels for the month.
This, the report said, was 0.03 million barrels per day or 1.5 per cent below the average of 2.00 million barrels per day or 62.0 million barrels produced in the preceding month.
Also, the report stated that Nigeria earnings from crude export dropped by $95 million (N15.2 billion), as the country exported crude valued at $4.819 billion (N771.04 billion) in the period under review, dropping by 1.9 per cent from $4.914 billion (N786.240 billion) in March.
Specifically, the country’s crude export in April stood at 45.60 million barrels, compared with 46.5 million barrels exported in March.
The report attributed the decrease in production to incessant pipeline vandalism and crude oil theft.
However, the country earned N22.66 billion from local crude sales, as the CBN disclosed that 13.05 million barrels was delivered to the refineries for domestic consumption.
Pressure on fiscal position
According to analysts at FBN Capital, the numerous shut-ins over the past year due to escalating crude oil theft, is likely to put pressure on the Federal Government’s fiscal position in the near term.
Market analysts, Messrs Gregory Kronsten and Olubunmi Asaolu, argued that indigenous players are also likely to be affected given that they mostly rely on the oil majors’ pipelines and export terminals for their crude transport activities.
They said: “We expect more divestment activities to follow as the majors shift focus to deepwater and/or countries/continents which they deem to offer better risk-reward prospects.
“Amid the broader negative picture, the one positive consequence of this development is the opportunity for the indigenous players to grow their presence in the sector.
“While the delay in the passage of the Petroleum Industry Bill and the competing alternative technologies are likely to have significant long term implications for Nigeria’s oil and gas sector. In the near term, we believe crude oil theft is likely to be the greatest challenge the sector faces unless swift and decisive action is taken by the government to address the problem.”
Also, another analyst, Mr. David Adonri, the Chief Executive Officer, Lambeth Trust, said: “There are short term and long term threats to Nigeria’s crude oil revenue. Oil theft and pipeline vandalism are short term that ought to be dealt with by the security force if they are not compromised. However, more worrisome is the increasing exploitation of shale gas/oil by industrialised economies that consume our crude oil.
“This long term threat to federal revenue and the economy can proactively be addressed through diversification of the economy to manufacturing and agriculture.”
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