Of pipeline sabotage, production shut-in and Nigeria’s oil industry
The incessant sabotage of oil and gas assets, especially pipelines, has increasingly assumed a source of concern for operators, stakeholders and analysts in the Nigerian oil and gas industry.
It would be recalled that not long after the completion of the repairs of the Escravos gas pipeline, which collapsed under the weight of frequent vandalism, another key pipeline Trans-Forcado was shut down for repairs in March as a result of vandalism, leading to significant shortfall in power supply in the country.
Last week, Shell Petroleum Development Company (SPDC) lifted the force majeure it imposed on crude oil exports from the Forcados terminal, after the removal of crude oil theft point on the export line.
The subsea line of the terminal was shut when a leak was discovered on March 4, 2014, leading to the declaration of force majeure on March 25 to allow for repair work.
The shutdown of the terminal took a toll on the output and revenues of companies who depend on it for exports and production as well as the nation’s oil earnings. Shell and other third parties export crude oil from the Western Niger Delta through the Forcados terminal.
United Kingdom-based Heritage Oil Plc said production and revenue from its Oil Mining Lease (OML) 30 in Nigeria in the first quarter of the year was impacted negatively by the shut-in at the Forcados terminal where crude is exported. The damage to the terminal stopped export shipments for about one month thereby forcing OML 30 to shut-in for a similar time once storage had reached capacity.
Seven Energy Limited also said its production was impacted by a shutdown of the Forcados pipeline for four weeks, with average Q1 2014 gross production volumes of 36,400 barrels of oil per day at OMLs 4, 38 and 41.
The country’s oil revenue dropped to N584.15 billion in April from N614.35 billion in March, due to production shut-in at the Qua Iboe and Yoho terminals as well as the shut-down of Forcados, according to the ministry of finance.
Exports of the Forcados grade, which typically amount to around180,000 barrels per day (bpd), fell close to zero for May loading with flows halted by pipeline repairs.
Nigeria’s crude production and exports have declined steadily over the last 12 months because of pipeline problems, production shut-ins and large-scale oil theft.
If this trend of frequent sabotage of oil and gas infrastructure, usually resulting to production shut-ins, is left to linger, a reversal of the dwindling fortunes of the country’s oil and gas industry will remain a mirage.
FEMI ASU