Royal_Dutch_ShellNigeria faces a serious credit crunch in the months ahead as crude oil production has dropped further by 150,000 barrels per day due to continuing theft and vandalism of crude pipelines.

The Shell Petroleum Development Company of Nigeria Limited said on Thursday that it shut the Trans Niger Pipeline on Wednesday following an explosion and fire at a crude theft point on the 28” section of the facility at Bodo West in Ogoniland.

The implication of this development, according to SPDC, is that some 150,000 barrels of oil per day will be deferred from the closure of the TNP.

Prior to the incident, the Managing Director, SPDC, and Country Chair, Shell Companies in Nigeria, Mr. Mutiu Sunmonu, had recalled that SPDC shut down the 28” TNP to remove crude theft connections.

He confirmed that the oil company had now closed the 24” TNP as a precautionary response to the fire that occurred on Wednesday.

This, according to him, means that the entire TNP system comprising the 28” and 24” pipelines have been shut-in.

The SPDC boss said the 24” TNP would be reopened when it was safe to do so, while the 28” TNP would remain shut-in until the fire had been extinguished, and investigation and damage assessment completed.

Commenting on the development, Sunmonu said, “This is another sad reminder of the tragic consequences of crude oil theft. Unknown persons continued to reconnect illegal bunkering hoses at Bodo West even as our pipeline team was removing crude theft points.

“It was, therefore, not surprising that the fire occurred from the continuing illegal bunkering even as a previous crude oil theft point was being repaired by the team. So far, there is practically no spill from this event as the oil is burning off. What is visible in the water is from an earlier oil spill, which was also as a result of oil theft.

“The explosion also triggered a fire on a nearby barge. Crude theft continues to pose significant challenges to people, the environment and the local and national economy, and all stakeholders must work together to stop this criminal activity.”

Oil production in the country had on April 18, 2013 dropped by 150,000bpd when the Nigerian National Petroleum Corporation/SPDC Joint Venture declared a force majeure on Bonny Crude due to incessant crude oil theft.

The Acting Group General Manager, Public Affairs Division, NNPC, Ms. Tumini Green, consequently confirmed a significant drop in crude oil production for the first quarter of 2013.

She said the Federal Government lost about N191bn ($1.23bn) to oil theft and vandalism in the first quarter of the year.

Green said daily crude oil production fluctuated between 2.1 million and 2.3 million barrels per day during the first quarter of the year, compared with the projected estimate of 2.48mbpd.

She said, “Expectedly, this fall between actual production and forecast in first quarter of 2013 has resulted in a drop in crude oil revenue of about $1.23bn (N191bn) that should have accrued to the Federation Account.

“Investigations showed that 53 break points were discovered along the 97-kilometre Nembe Creek Trunkline. Repair work is expected to last about six weeks.

“This will further reduce our April and May monthly average to about 2.2 million bpd and further decrease crude oil revenue by about $554m (equivalent to N83bn) that should have accrued to the Federation Account.”

Crude oil production in the country also dropped by another 127,000 barrels per day on May 31 following the declaration of force majeure on the Usan crude by the oil major, Total Plc.

Total, which confirmed that production was completely halted, said the force majeure was expected to affect 127,000bpd of Usan crude expected to be exported in June.

The oil major declared that four cargoes of Usan, which represent around 127,000bpd due to be exported in June, would be shut in.

About $7bn is said to be lost to oil theft and vandalism in Nigeria annually.


Information from Business News was used in this report.