Measurement infrastructure gap, oil theft responsible for revenue loss in oil, gas industry — CISLAC
The Civil Society Legislative Advocacy Centre (CISLAC), has observed inadequacy in hydrocarbon measurement infrastructure, oil theft as major causes responsible for Nigeria’s inability to fully account for and maximize the benefits of huge oil production.
The Centre also stated that spillage, corruption, gas flaring and gross mismanagement and maladministration of extractive resources have denied the country the benefits that ought to accrue to government from the sector.
Executive Director of CISLAC, Auwal Ibrahim Musa (Rafasjani), at a media engagement in Lagos said that Nigeria which has a maximum crude oil production capacity of 2.5 million barrels per day, is also Africa’s largest producer of oil, and the 13th largest oil producing country in the world, but has nothing much to show for that.
Musa told journalists at a one-day sensitization workshop on addressing oil and gas revenue loss in the Nigerian extractive sector: issues, implications and recommendations, that Nigeria has however faced significant challenges in managing the sector and maximizing its revenue potential due to the impact of the COVID-19 pandemic and the attendant fall in crude oil prices and drop in demand for petroleum products.
He said a key finding in the 2009 audit of the Nigerian oil and gas industry by the Nigeria Extractive Industries Transparency Initiative (NEITI) was ‘inadequacy of metering infrastructure’ in the sector.
He said in 2012, the Petroleum Revenue Special Task Force (PRSTF) reported the same problem, adding that five years later, the National Petroleum Policy stated that the state of metering and measurement of hydrocarbons was not satisfactory.
He added: “The hydrocarbon metering system is expected to provide the necessary data upon which Royalty and Petroleum Profit Tax (PPT) are calculated. A consequence of the inadequacy of metering infrastructure, therefore, is that Nigeria may be losing revenue that otherwise could be used to fuel economic growth. The OPEC disclosed at the 2021 Nigeria International Petroleum Summit in June 2021 that there was a $1 trillion loss in revenue in two years by Nigeria and oil-producing members due to the plunge in oil prices between 2015 and 2016.
“The Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest report with information from 98 organizations including 88 oil and gas companies, 9 government agencies and the Nigerian Liquefied Natural Gas (NLNG) Company, revealed that Nigeria lost 42.25 million barrels of crude oil valued at $2.77 billion to oil theft in 2019. NEITI data also showed that between 2012 and 2015, Nigeria lost about US$9.8 billion and US$1.09 billion due to crude oil and petroleum products pipeline theft/sabotage respectively.
“Both the Federal Government and some economy analysts have attributed the country’s recent slide into recession to adverse developments around the oil sector. Broadly speaking, two things primarily affect petroleum product earnings – the volume you can sell and the price you can sell it at. Hence, the Nigerian government while exploring the diversification of its economy towards non-oil product earnings, needs to aggressively address volume-related gaps in extractive sector operations towards improving oil and gas revenue mobilization for sustainable development financing.
“The above key extractive sector issues have remained elusive with divergent opinions as to its workability and cost and considering its strategic place in oil and gas sector governance and the country’s economy. To advocate for improvement in the state of metering infrastructure and practices, the first step is to understand the current state of the infrastructure in place and the avenues of extractive revenue loss; and devise collaborative strategies to drive the needed advocacy to turn the sectoral tide to the benefit of Nigerians.”
Chairman/Chief Executive Officer of Nigerco Nigeria Limited, Engr. Yabagi Sani, in his paper, expressed regrets that metering of Nigeria’s oil production was not captured in the Petroleum Industry Bill (PIB), which was recently passed by the National Assembly.
He said the action of the lawmakers manifest the country’s unreadiness to stop the act of revenue loss through stolen crude and the intent of the government to holistically pursue paths that would free the country’s oil and gas industry from bondage.
