Militarism and oil production

The National Assembly's probe of activities in Nigeria's oil and gas sector brings out to the public domain issues and challenges surrounding operations in the sector, which the Federal Government, at best would wish remains hidden.

On daily basis crude oil production are suspended and most times outrightly shut down as a result of the growing insecurity in the nation's oil-rich Niger Delta.

Recent militant attacks on oil facilities in the Niger Delta have caused the country daily production cutback of over 540,000, or about $39million losses in revenue.

Refining capacity

In addition, the nation's four refineries - the two in Port Harcourt, Warri and Kaduna with a combined refining capacity of 445,000 barrels per day risk being totally shut down due to lack of crude supply. This follows the blow up of the Chanomi Creek Pipeline, which transports crude from Port Harcourt to feed Warri and Kaduna refineries.

Nigeria again is on the verge of threading on familiar path, as the country had gone through this same road in 2006 and 2007, when it depended solely on imported fuel to meet domestic energy needs.

Indeed, statistics from the Department of Petroleum Resources (DPR), the industry regulator indicate that not much had been happening in the refineries anyway, with all begging for Turn Around Maintenance (TAM) due to dilapidated and even out dated machinery compounded by shortage of power supply and funding.

NEXT on Sunday exclusively reported on May 25 how the Nigerian National Petroleum Corporation has been negotiating with its former subsidiary, Eleme Petrochemical Company Limited, now owned by the Indorama Group for power supply to its Port Harcourt refineries in exchange for gas for Eleme's operations.

The development underscore the worsening power supply situation in the country for which President Umaru Yar'Adua still procrastinates on whether or not to declare an emergency situation.

DPR statistics put the average capacity utilisation for the 1st Quarter of 2009 at 19.13 percent, meaning that Nigeria was importing more than 80 percent of her fuel need. Divided among the refineries, the Warri Refining and Petrochemical Company recorded the most refining operations with 54.42 percent or 1.78 million barrels of the over 7.66million barrels of crude refined in the first quarter. The Port-Harcourt Refining Company followed a very far second with 7 percent or over 1.78 million barrels, while the Kaduna Refining and Petrochemical Company remained shut down during the period in review.

NNPC's story

The NNPC said on Wednesday, that the nation's average daily production output from its joint venture cash call, as at last Friday, stood at a reduced level of 1.3million barrels per day, with local refineries running out of crude supplies due to upped pipelines vandalism by militants.

According to the NNPC, the Port-Harcourt and Warri refineries have been significantly affected by increase strikes from the militants since the military campaign began in May, 2009, forcing the refineries to shut down due to damages on the Nembe-Port Harcourt and Escravos-Chanomi pipelines respectively.

"Yes, what we currently have now is for 15 days sufficiency and after that it will finish," said Gabby Meheux, General Manager Technical, who represented the Group Managing Director, Sanusi Barkindo, at a sitting of the House of Representatives Ad hoc committee on the Niger Delta crisis.

"The consequence is that no refining would take place therefore no product would be available from Kaduna because the pipeline that would have supplied crude to Kaduna was vandalized and until it is repaired we cannot pump crude" he said.

Nigeria's crude status

In the wake of militant onslaught on oil facilities in the Niger Delta in December 2005, Nigeria's crude oil production both from the Niger Delta and deep offshore regions was about three million barrels per day, which gave the Federal Government the confidence that its new production targets of four million barrels per day and 40 billion barrels reserves by 2010 is feasible.

The Shell Group alone made up for over one million barrels per day (bpd), followed by ExxonMobil with over 750,000bpd, while the balance was shared among Chevron, Total and Eni-Agip groups.

The representative of the Managing Director of the Shell Petroleum Development Company, Oriseh Agbarah on his part, told the lawmakers that his company which produced about 350,000 bpd before the May military operation started is currently doing less than 200,000. "We are doing less than 30,000 from the whole of Delta region", he added.

2010 is about 6 months away and the country is nowhere near achieving these targets, as shown by the DPR statistics, which put average daily production as at February at a little above two million bpd. Also reserves base had depleted further by 0.67 percent of over 219 million barrels down from 32.71 billion barrels recorded at the beginning of the year. Nigeria's oil reserves were previously estimated at 35billion barrels.

The insecurity situation in the Niger Delta has made the major oil companies to concentrate more exploration and production activities in the deep offshore the new hope of the nation for continued oil production, where giant fields like Shell's Bonga is on with 225,000 bpd since November 2005; ExxonMobil's Erha 150,000bpd (May 2006); Chevrons' Agbami 250,00bpd; Total's Apko 25,000bpd (March 2009); and Agip's Abo 80,000bpd.