Austin Avuru, founding MD/CEO of Seplat Energy and Executive Chairman AA Holdings has warned that Nigeria’s oil production has reached an emergency critical status. He stated that some oil production wells don’t get to see 80% of production making it to the terminals due to oil theft.
Avuru disclosed this in a report titled “Reining in the Collapse of the Nigerian Oil industry” published by the Africa Oil + Gas report on Thursday.
He urged the NNPC and regulators to set up a “war room” strategy to deal with the rising issue of oil theft in Nigeria.
What Mr Avuru is saying
He stated that the phrase “crude theft” which crept into the industry around 2010 has taken a new meaning with the entire export pipeline networks being surrendered to vandals and illegal bunkerers.
He said that there are some pipeline systems now (particularly in the East) where 80% of production injected therein does not make it to the terminal. He disclosed that almost every producer is now cooking up “alternative evacuation” schemes that cost four to five times what pipeline export would normally cost.
“The stark reality today is that the IOCs are leaving, their decision is outside our control as a nation, in fact, over the last twelve years, Shell and Chevron have divested from a total of 21 blocks. It is now public knowledge that shell and ExxonMobil are now exiting the onshore/shallow water altogether.
“In fact, my projection is that, by Christmas of 2025, TOTAL would be the only IOC in J.V with NNPC.
“The situation is the same with domestic gas delivery, even though we are weaving all the right slogans about the future of gas in Nigeria, in the past 5 years, I can only point at a couple of Nigerian independents who are investing in gas development and processing of the domestic market,” he said.
He added that the state of the Nigerian Petroleum Industry is a national emergency, as oil production is down to about 1.4 million BPD and declining, and this includes 600K BPD from the deep-water. Domestic production has stagnated to about 1.2 billion cubic feet per day over the past five years at a time when projected production should have been 3.5BCf per day.
“The collateral impact of course is the low level of power generation which itself has stagnated at about 4,000 MW per say since 2015,” he said.
Avuru urged that Nigeria at the current oil production level can only be imagined when oil prices return to the $60 per barrel level, highlighting that the situation has to be treated as a national emergency.
What can be done:
- NNPC and upstream regulators need to set up a war room, some form of an effective task force to develop a blueprint.
- A well organized transition of the IOCs driven by a clear policy direction from the retreating IOCs to a crop of efficient independents with the requisite resources will have to be implanted.
- He added that just standing back and intervening by pre-emptive acquisitions cannot be a sustainable solution proffered by NNPC.
- He also called for a deliberate policy-driven return to the traditional onshore/shallow water terrains as 80% of Nigeria’s remaining reserves are still in this belt.
“Nigeria needs to address the twin problems of reliable pipeline evacuation and community restiveness. These problems have been heightened, not because there is no solution, but because we have abandoned every attention to them in the last 15 years
“Nigeria needs to match its gas slogan with effective, measurable, policy actions to drive investments in domestic gas supply,” he added.