Nigeria’s pipeline vandalism mirrors global oil price movements
By The Nigerian petroleum industry has been confronted by two sapping challenges over the years. The challenges relate to the prevalence of militancy and oil pipeline vandalism in the Niger Delta.
While the former has significantly attenuated in the aftermath of the Amnesty deal in 2009, the latter appears to have escalated both in incidence and impact.
Theft of oil and gas products and pipeline vandalism in Nigeria trail movements in the global oil prices, rising prices have foreshadowed increased incidents of vandalism, data compiled by BusinessDay show.
Oil capitalism coupled with poor governance and neglect of basic human rights has created a myriad of problems in the communities in the Niger Delta. Pervasive poverty, lack of employment, fuel shortages and pursuit of entitlements from the petroleum sector drives citizens towards the vandalising the pipelines that criss-cross their communities.
The Niger Delta, which fuels Nigeria’s economy and accounts for 95 percent of Nigeria’s export earnings and over 80 percent of Federal Government’s revenue, remains the one of the poorest regions of the country.
Products theft and vandalism destroy value and put the Nigerian National Petroleum Corporation (NNPC) at disadvantaged competitive position. A total of 1336 vandalised points have been recorded from January 2017 to January 2018, the state-owned petroleum corporation said in its January Monthly Financial and Operation report.
Global Brent crude oil prices hit a 12 month high of $69. 08 in January 2018 and the NNPC’s monthly report in January showed a 12 month high record of incidents in pipeline vandalism.
A total of 194 pipeline points were vandalised, 22 pipeline points either failed to be welded or ruptured/clamped. Thus, 216 pipeline points were destroyed in January 2018 against the 176 points recorded in February 2018. PHC-ABA and ABA-ENUGU pipeline segment accounted for 187 points or 86.57 percent of the affected pipeline points.
February 2017 recorded 49 incidents of pipeline vandalism, the least in 2017, when oil prices were at $54.35. With 20, the highest number on the Gombe segment.
“It is likely a spurious correlation. Incidences of vandalism in Nigeria are usually not tracked by many. I think it is more about the volume lost. If an entire export terminal was lost due to vandalism then yes, correlation could occur. If it is some minor vandalism that volume lost is not much, it will be impossible to see any correlation” Jubril Kareem, energy analyst at Ecobank Nigeria Plc told BusinessDay in a phone interview.
Nigeria lost N19.993 billion to sabotage and pipeline vandalism in the month of August, 2017 when oil prices reached a three month high of $51.70, from $46.37 in June and $48.48 in July of 2017, according to data released by the Nigerian National Petroleum Corporation, NNPC.
The NNPC, in its Monthly Financial and Operations Report for August 2017, showed that the loss recorded in August represented an improvement of 40.37 percent compared to N14.243 billion lost in July 2017.
September 13, 2017, the NNPC said about 700,000 barrels per day (bpd) of crude oil were deferred in 2016 due to pipeline sabotage. Maikanti Baru, Group Managing Director, said this in Abuja in a statement Ndu Ughamadu through the Group General Manager, Group Public Affairs Division.
Baru said the sabotage brought Nigeria’s production down to as low as 1.3 million bpd from 2.2 million barrels targeted for the period, a reduction of about 40 per cent. The NNPC had recorded 27 breaching incidents on the Trans Niger Pipeline (TNP), and the Trans Forcados Pipeline (TFP) with a capacity of 300,000 bpd, 17 breaches were recorded in 2016.
“The factors responsible for these incidents of pipeline vandalism are varied. Sometimes pipeline vandalism drives up oil prices because demand remains constant but there is shortfall in supply” Ayodele Oni, energy partner, Bloomfield Law Practice.
“Another scenario is, when oil prices are high, countries such as Nigeria generally plan to increase production targets to cash in on the excess crude price. Pipeline vandalism then could serve as tool to get government attention because it disrupts production targets” Ayodele said.
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