According to information from the Central Bank of Nigeria, bank loans to oil companies engaged in the upstream and downstream sectors of the country’s oil and gas industry totaled N5.93 trillion as of June 2022.
Operators in the upstream and services subsectors owed banks N1.65tn, whilst those in the downstream, natural gas, and crude oil refining subsector owed banks N4.28tn. This represents an increase of N250 billion from the $5.68 trillion in debt as of December 2021.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) had previously expressed concern in March on the significant losses experienced by oil and gas companies as a result of theft and vandalism.
Festus Osifo, the president of PENGASSAN, claimed that between October 2021 and February 2022, operators vandalized more than 90% of the crude oil they poured into the Trans National Pipeline. He pointed out that despite the current high price of crude oil on the global market, this had prevented Nigeria from generating more revenue.
Another issue caused by vandalism, according to Osifo, is that businesses are being forced into curtailment when the assets/export pipelines are broken since they are unable to export their output, which results in production losses.
He claims that each operator in the industry suffers a monthly output loss of 10 days on average as a result of vandalism. He said, “Recent preliminary work showed that about 150 illegal tappings were used in siphoning crude oil from the TNP.”
In a bid to offset the growing costs, he said companies in the sector had been forced to turn to financial institutions. He added, “The operating cost of oil and gas firms, both those in the downstream and upstream sub-sectors, is very high now, particularly because of issues of vandalism and security.
“You will see that because of insecurity problems, many of these companies, both onshore and offshore, employ the services of heavy security personnel to safeguard their equipment. Sometimes even their staff has to be secured.
“This additional security costs a lot of money, and this is affecting their bottom-line. On the issue of vandalism, I have observed that a lot of these firms are being harassed by their host communities, which is why they improve their CSRs and give back to these communities.”
Earlier this month, the House of Representatives had decried the growing spate of oil theft in Nigeria, warning that it might ground the economy if it remained unabated.
The Minority Caucus in the House, in a statement recently issued, said it was alarmed by the massive oil theft in Nigeria.
It was reported recently that the Federal Government awarded a pipeline surveillance contract to the former leader of the Movement for the Emancipation of Niger Delta, Government Ekpemupolo, popularly known as Tompolo, to help reduce the level of oil theft and pollution caused by bunkering activities in the region.