By Taoreed Alaba

A major problem bedeviling the Oil and Gas sector today is the issue of pipeline vandalism. This trend which started in the 80s has refused to yield any possible solution as the incessant sabotage of Oil and Gas facilities continue to have negative impact on the distribution of petroleum products across the country. Rather than decreasing, pipeline vandalism is on the increase due to the lucrative nature of the illegal business.

To show how serious and dangerous the trend portends for Nigeria, the Nigerian National Petroleum Corporation (NNPC) recently provided graphic details of how the activities of pipeline vandals have disrupted the free flow of petroleum products and crude oil supply in its pipeline system leading to a colossal cost of over N174.57 billion in product losses and repairs of products pipelines within the last 10 years. The NNPC’s revelation showed that the advent of illegal oil bunkering, pipeline vandalism and product theft have all massively impacted on the capacity of Nigeria’s massive oil and gas assets to function optimally.

According to data released recently by the NNPC, a total of 16,083 pipeline breaks were recorded within the last 10 years- with 398 pipeline breaks representing 2.5 percent, due to ruptures, while the activities of vandals was responsible for 15,685 breaks which represents 97.5 percent of the total number of cases.

Oil bunkering and pipeline vandalism which used to be very common in the Niger/Delta region is now fast spreading to other areas in the country. The system 2E/2EX that conveys products from the Port Harcourt refinery to Aba- Enugu-Makurdi depots onwards to Yola-Enugu-Auchi which was previously known to be a dangerous spot and haven for pipeline vandals is now conceding sabotage strength to Arepo- an oil community in Ogun State. Even though the activities of pipeline vandals had been on for a very long time in this community, it only became a matter of serious concern last year. Arepo is a village in Obafemi-Owode Local Government Area of Ogun State would not have been popular if not for the activities of vandals which are very common in the area. The NNPC’s pipelines in the area supplies fuel from Lagos- Ibadan, Ilorin and some other northern parts of the country.

Ordinarily, the sabotage activities of the vandals in the village would have gone unnoticed if not for September last year, as an explosion rocked the area, while some vandals were carrying out their illegal business.

Investigations revealed that vandals in Arepo have turned pipeline vandalism into a family business as most of them see it as a lucrative means of livelihood. Because of the lucrative nature of the business, vandals are said to have resorted to violence as they often engage security agencies in shoot-outs for trying to prevent them from engaging in their lucrative business.

Even though many lives were lost in last year’s fire incidence at Arepo, it became very serious when three officials of the Pipelines and Products Marketing Company (PPMC), who were deployed to effect repairs on the broken pipelines, became victims of notorious Arepo vandals as they were reportedly killed and buried in shallow graves around the creeks in the area.

Although arrests were made and some of the suspects are currently standing trial, the obstinate Arepo vandals struck again on January 11, 2013 but suffered great casualties as some of them were burnt alive as they were scooping fuel from system 2B.

Unimpeded by the unfortunate demise of their partners in crime, barely two weeks after the explosion that claimed the lives of many of them; some others sprung into action and vandalised the 2B pipes again thereby resulting to another case of oil theft.

Further investigations revealed that there are more to ongoing pipeline vandalism in Arepo community than meet the eye. Many inhabitants of the village especially the unemployed youths we gathered have turned to pipeline vandalism to survive, this they see as a better means of livelihood.

Oil and Gas investigations also showed that vandals in the community have even formed themselves into groups and often clash with one another in what can be described as ‘supremacy battle’. That we gathered is the reason why there is proliferation of arms and ammunitions in the community.

Another issue of serious concern is the issue of porous security in the community and also allegations that some corrupt officials of NNPC, the Nigeria Police, as well as officials of Nigeria Security and Civil Defence Corps (NSCDC) might have been providing supports to pipeline vandals in the area.

Some of these officials are said to be under the payroll of the vandals and usually give them clue on how to evade security forces and carry out the illegal business.

Although the joint patrol team of Inspector-General of Police Special Task Force on Anti Pipeline Vandalism and officials of Nigeria Security and Civil Defence Corps (NSCD) are currently stationed in the community, there are fears that the trend may continue due to the lucrative nature of the business.

By Monday Osaneku

According to geoscientists, Nigeria crude oil reserve is estimated to be over 40billion barrels and over 600trillion cubic feet (c ft) of gas reserve, which place Nigeria as the 3rd country with enormous gas deposit that are yet to be tapped.

In the past, exploration and exploitation of crude oil were mainly in the Niger Delta region which comprises of Ondo, Edo, Delta, Bayelsa, Rivers, Abia, Imo, Akwa Ibom and Cross River.

But recently, hydrocarbon has been discovered in sedimentary basins of the country after some years of intensive exploration expedition through the use of modern high resolute seismic techniques and technology. The sedimentary basins include Anambra basin, Benue Trough, Chad basin and Sokoto basin. Thus, the States where these basins are situated would no doubt, become an oil producing state when full production commence.

It is imperative to recall that in the past, the Royal Dutch company D’Arcy company initially got the whole of Nigeria as one huge acreage and the search was trimmed to the Niger Delta where in 1956, some 15 drill holes were drilled beginning with the Iho-1 North West Owerri and finally the first successful Well was drilled at Oloiribiri, Bayelsa State. This landmark achievement not only commendable, but attracted other international oil companies (IOCs) such as Exxon-MOBIL, AGIP, SAFRAP (Elf), TENNECO and AMOSEAS (Texaco / Chevron) to join the exploration efforts both in the onshore and offshore areas of Nigeria.

Thus, with the emergence of the IOCs in the hydrocarbon play in the country, extension of right of concession which was only given to SPDC was extended to the new comers and Shell relinquished parts of its onshore License giving way for the acquisition of Oil Mining Lease (OML) by the other international oil companies and subsequent delineation of Niger Delta region into major field and marginal field.

However, Nigeria oil and gas sector has witnessed a rash of divestment of their equity by some international oil companies such as Shell, Total, Conocophilips and Agip. Thus, the IOCs had sold over a 45 per cent stake in the seven oil concessions in five transactions.

For instance, Shell Petroleum Development Company (SPDC) a subsidiary of Royal Dutch Shell had sold it 30per cent interest in Oil Mining Lease (OML 30) with share production of 11,000bpd in the Niger Delta to Shoreline Natural Resources Limited.

French energy company, Total, has sold its 20per cent stake and operating mandate of its Nigerian offshore project to a local unit of China Petrochemical Corporation for $2.5billion.

Conoco Philips, a United States (US) oil company, also ceased from oil exploration in Nigeria and thereby disposed of its assets in the country.

According to experts in the industry, the divestment of stakes in the oil and gas sector may not be unconnected with the fact that the IOCs are considering some of the onshore assets as not commercially unviable as some of the oil fields are gradually becoming Brownfield’s.  According to industry players, the divestment allows the companies to prioritize the most attractive opportunities, and reconfigure or exit from less attractive ones.

In addition, incessant crises between the host communities and the oil company operating in the OML would have prompted the divestment for deep water prospect where there are fewer crises and less financial expenses on conflict resolution.

The decision to divest their equities in the sector could be connected with what the industry players considered as unfavorable profit-sharing agreement, high royalties, taxes and insecurity, considering the production output of the field.  According to the Managing Director of Seplat Petroleum Company, Austin Avuru, said that joint venture(JV) terms that is taxes, royalties etc in Nigeria are some of the highest in the World, with additional risk such as bunkering and insecurity. He said that Nigeria should reform the petroleum sector to make it globally attractive in terms of fiscal regime adding that Government is strengthening failed institutions and frustrating private investment.

On the other hand, policy makers are of the opinion that rash divestment by IOCs is a ploy to escape maturing onshore liabilities by hiding behind the indigenous oil firms to re-buy sold oil blocks in order to pay lesser royalties coupled with the fact that the old and new investors have been cautious, expressing reservations on some aspect of the PIB that they consider not competitive such as the legal, regulatory and fiscal frame-work.

Reacting to the relinquishing of stakes in the oil and gas sector, the Group Managing Director of Shell, Mutiu Sunmonu said that the divestment was part of the re-shaping of SPDC’S onshore portfolio which is in line with the Federal Government’s aim of developing local companies in the country’s upstream oil and gas.  He said that the divestment cut across the globe as Shell’s strategy in upstream is designed to drive financial growth, irrespective of production entitlement, with production growth regarded as a long-term proxy for financial growth.

Nigeria must be conscious of the divestment behavior in the oil and gas sector as well as the reasons given by the oil majors. According to experts in the industry, when foreign companies that operate within the key sector of the economy start a trend of divesting from the host country, it is either a sign of economic weakness or, more worrisome, a sign of bleak economic future.

The impact of IOCs divestment of their equities would on doubt have adverse effect in the sector and Nigeria economy. For instance, the sale of oil blocks and their gas resources will threaten government’s power sector reform agenda by jeopardizing domestic gas supply for power generation especially the integrated power project (IPP).

The divestment could lead to job loss and insecurity because some of the workers from the Multinationals would be displaced and the local firms may not be able to absorb the workers. Even when they are absorbed, the workers will find it difficult to cope due to different working conditions they were under the Multinationals.

Also, the divestment would reduce production from the current 2.4mbpd if the firms that acquired the asset could not manage the field.  This could generate a situation were  production would be down by about 40 per cent by 2020 if there are no new investment because over 75 per cent of the crude produced in Nigeria is from the international oil companies. Experts pointed out that when the daily production of crude slumps below Government benchmark, it could have an adverse effect on the budget which is computed from the daily production of 2.5mbpd at the price benchmark of $78.Thus, less money would be realized as less crude is produced daily.

In addition, the divestment could generate crisis between the Host Communities and the local firm that acquired the equity. Recently, Isoko Community in Delta State shut down all oil exploration in their land. The shut down was as a result of collapse of talks between the oil producing areas and officials of Shoreline Natural Resources Ltd and First Hydro Carbon Ltd, represented by Nigeria Petroleum Development Company (NPDC), which bought 45 per cent equity stake of Shell, Total and Agip, OML 30 and OML 26 which comprises of Ogini, Isoko Deep, Ofa and Ovo oil fields were allegedly without due and prior consultation with various Communities that are stakeholders in Isoko Land. T he divestment has left the landowners, families and host communities, dejected and deprived of full benefits of their rightful God-given natural resources.

It is globally accepted that national economic trends affects business decision, thus, Nigeria should be aware of the global trends that affects the oil and gas industry. However, Federal Government should be proactive and ensure that the IOCs are not hiding behind the indigenous firms to avoid what they considered as un-favorable Sharing Agreement as they would later re-buy the acreage from the indigenous companies.

All regulatory authorities such as the Department of Petroleum Resources (DPR), Nigeria Content Development Board (NCDMB) should double their effort in scrutinizing all Exploration & Production companies (E&P) to ensure that the true identities of the Board members are clearly seen and understood to be Nigerian.

Government should express it readiness to diversify the economy through effective polices and programmes. The time has come when Nigeria should diversify into non-oil sectors such as agriculture that is non-exhaustive with strong comparative advantage and super employment generation potential.

Lastly, Nigeria’s indigenous E&P should seriously engage the local experts in every sector in the oil and gas industry for local and international training so that when the IOCs eventually quit, Nigeria would have competent hands to manage the industry.