Nigeria’s Crude Oil: These Data is Damning

80% of some oil producers’ production does not make it to the terminals because of oil theft.

Over the years, oil has been the heart of the Nigerian economy. However, years of mismanagement and low investment in infrastructure have undermined the sector.

Here’s a quick, deep dive into the statistical anomalies and warning signs that policymakers need to examine for introspection and an immediate solution.

1. According to OPEC, Nigeria’s oil production was 1.39 million barrels per day (bpd) in January 2022, 260,000 barrels below its production quota of 1.68 million barrels per day in January. The average Brent oil price in January was $86.51.

Implication: Daily realized loss – $25 million
Monthly realized loss – $752m – (N309bn – using N411 for $1).

2. According to OPEC, Nigeria’s oil production was 1.26 million barrels per day (bpd) in February 2022, 440,000 barrels below its production quota of 1.70 million barrels per day in February. The average Brent oil price in January was $97.13.

Implication: Daily realized loss – $42.7 million per day. Monthly realized loss – $1.3 billion – (526.9 billion naira – using N411 at $1).

3. According to OPEC, Nigeria’s oil production was 1.23 million barrels per day (bpd) in March 2022, 490,000 barrels below its production quota of 1.72 million barrels per day in March 2022. March. The average Brent oil price in January was $117.25.

Implication: Daily realized loss – $57.45 million. Monthly realized loss – $1.72 billion – (N708.39 billion – using N411 at $1).

4. According to the report of the Auditor General of Nigeria reviewed by lawmakers, 107,239,436.00 barrels of crude transported for domestic consumption went unaccounted for by the NNPC in 2019.

According to Statista, the average price of Brent oil in 2019 was $64.3.
Implication: This represents $6.8 billion of unaccounted for crude oil. The naira equivalent is 2.2 trillion naira – using 306 naira for $1 (2019 exchange rate). Nearly 25% of Nigeria’s national budget in 2019 (8.83 trillion naira)

5. According to the Accountant General of the Federation, for this period (2019), only 608.7 billion naira ($1.4 billion) was received for remittance from NNPC, different from 1.27 trillion naira ( $3 billion) that the NNPC claimed to have handed over. .

6. According to Nigeria’s extractive sector watchdog, National Extractive Industries Transparency Initiative (NEITI), nearly 100 oil and gas companies operating in Nigeria owed the government 2.6 trillion naira ($6.2 billion) in taxes, royalties and concessions on rents.

7. In 2018, Kaduna Refinery had no revenue but recorded a loss of N64.3 billion.

8. If you add the losses of N1.6 trillion suffered by Porth Harcourt, Kaduna and Warri refineries lost from 2014 to 2019 to the combined costs of fuel subsidy payments spent in Q4 2021 (N713 billion ), you would be able to finance the Presidential Infrastructure Development Fund of 2.3 trillion naira budgeted for the Lagos-Ibadan highway, the second Niger bridge, the Abuja-Kaduna-Zaria-Kano road and the hydroelectric project of Mambilla without borrowing.

9. In 2021, the cost of gasoline subsidies was N1. 4 trillion. The federal government’s total oil revenue was 542 billion naira between January and December 2021, miles away from its projection of 2.5 trillion naira. The numbers for 2022 will be bleaker given rising oil prices.

10. 80% of production from some oil producers does not reach terminals due to oil theft. According to stakeholders, only 5% of all crude oil that was pumped through the pipeline between October 2021 and February 2022 was received by producers.

11. According to a tweet from Tony Elumelu, the Bonny terminal, which should receive more than 200,000 barrels of crude oil per day, is receiving less than 3,000 barrels, which led the operator Shell to declare a case of force majeure which harmed its business. At current prices, the missing barrels are worth more than $4 billion a year.

12. A report released by the Central Bank of Nigeria, CBN, shows that oil revenues for the ten months to October 2021 (10M-21) amounted to N4.03 trillion, representing a very marginal increase from 0.2% against N4.02 trillion. recorded during the corresponding period of 2020 (10M-2020) despite an increase in oil prices of 49% during the period.

13. Nigeria has 37 billion barrels of oil reserves. The United States has 36 billion barrels of oil reserves. But in terms of production: Nigeria produces 1.23 million barrels per day according to the latest OPEC report. The United States produces 11.6 million barrels per day.

In Africa, Nigeria lays claim to the title of Africa’s top oil producer, but globally, the phrase “empty barrels make the loudest noise” becomes more relevant.

14. The Excess Crude Account (ECA) is designed to save income generated from the sale of oil for rainy days.

Four administrations withdrew $107 billion between 2004 and April 2018 from this account and there was no serious impact on reducing the unemployment rate in the country, which fell from 13.4% in 2004 to 23.10% in 2018.

15. The last time Nigeria produced up to 2.5 million barrels per day was in 2010 (12 years ago), since then production has been on a slippery slope.

16. In 2012, the government took out a $1.6 billion loan to carry out turnaround maintenance on Nigeria’s refineries.

In 2021, the federal government approved $1.5 billion to rehabilitate the Port Harcourt Oil Refinery.
Add the subsidy payments of the last 5 months and you would have the new refinery that Egypt has just built for 4 billion dollars and which would produce 4.7 million tons of refined products per year when it is fully operational.

17. In June 2021, NNPC revealed that daily fuel consumption had increased from 60 million liters to 103 million liters. In February 2021, daily consumption was around 50 million liters. Knowing the bounty earned by smuggling and fueling back and forth to neighboring countries that sell fuel 2-3 times more expensive, can we see the connection between inflated consumption figures and increased smuggling across borders which the EFCC cried last year?

In disturbing news – India is Nigeria’s biggest oil buyer, but Russia has offered to sell its oil at a cut price ($35) due to international sanctions, Nigeria’s crude oil has struggled to find buyers, with India buying more Russian Urals in March 2022 than they ever bought in all of 2021.

Nigeria, which sells Bonny light at $105, however, has turned to Europe but still no buyers because the European market is well supplied. Warning bells?

Nairametrics