Substandard metering infrastructure, haphazard determination of physical volumes, and obscure procedures at crude oil and gas export terminals, according to Yabagi Sani, Chairman and Chief Executive Officer of NigerCo Nigeria Limited, are responsible for increasing financial leakages in the Nigerian oil and gas production and export value chain.
He also said that the government’s incapacity to supervise and oversee oil and gas operations, as well as a lack of transparency, accountability, and good governance, had resulted in an increase in crude oil theft and vandalism.
Sani made the remarks at the Civil Society Legislative Advocacy Centre’s one-day sensitization session on tackling oil and gas income loss in Nigeria’s extractive sector: Issues, Implications, and Recommendations (CISLAC).
According to the Nigeria Extractive Industries Transparency Initiative (NEITI) report, Nigeria lost 42.25 million barrels of crude oil worth $2.77 billion to oil theft in 2019, with data from the Federal Government indicating that over 400,000 barrels of crude oil are lost daily.
Yabagi Sani made a remark that despite 50 years of operating the oil and gas sector, which accounts for around 65 percent of the government’s overall revenue, oil theft and vandalism have yet to be addressed.
He cited a report by the Chairman of the Ad-hoc Committee on Nigerian Economic Council (NEC), which estimated that 22 million barrels of crude oil worth $1.5 billion were looted in the first half of 2019, as well as the Nigerian Navy’s revenue loss of N11.08 billion in 2018 and the Attorney General of the Federation’s recent report of $17 billion.
He claimed that the NEITI’s annual audit of the oil and gas industry from its inception until now has revealed the inadequacy of the methodology, practice, and equipment used in the physical measurement of key parameters such as volume, temperature, and gravity in hydrocarbons that are produced, imported, exported, or in transit within the country.
According to his results, there was variation in reported measures, and the financial income implications were enormous.
Sani also expressed regret that Nigeria’s oil is still lost to theft despite paying for pre-shipment, which he claims is supposed to help reduce or eliminate crude oil theft.
He grumbled, “The country should step up because everything we have done in the last 50 years has been the polar opposite of what we were intended to do.”
He suggested that multiple-phase flow meters, DC-powered with remote monitoring and control systems, be installed in all wellheads in both offshore and onshore fields in the country to address the country’s substandard measurement infrastructure and other issues, which allow for crude oil theft and vandalism.
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Unfortunately, according to Sani, producing businesses utilize a net oil balance, which does not account for factors like unaccounted oil theft or sabotage losses.
He recommended that each operator examine its pipeline network to identify key nodes where extra metering would quickly reveal losses.
“Metres should be installed at all places to show any inaccuracies in flow and to enable a quick response to a more precise area. These meters must have fiscal standards since the trends of such a flow will expose any unexpected changes, and the monthly reconciliation elements will reveal any ongoing shortage,” he explained.
Sani went on to suggest that immediate reforms are needed to ensure transparency in Nigeria’s oil and gas revenues.
He stated that the presidency should lead the Nigerian National Petroleum Corporation’s (NNPC) transparency and accountability reforms and strengthen oversight efforts to sensitize the corporation’s decisions.
He also urged for the legal metrology program to be implemented in Nigeria at no expense to the federal government in order to promote a culture of transparency and accountability in the oil and gas supply – chain sectors of the economy.
He stated that the execution of legal metrology in the country has become critical, especially as the rate of crude oil theft in the country is rising.
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