The latest report of the Nigeria Extractive Industries Transparency Initiative (NEITI) has shown that the total financial flows from Nigeria’s oil and gas sector slumped to $17.05 billion in 2016.
The report further revealed a 31 percent decline on the $24.79 billion generated in 2015, and a 75 percent plunge on the sector’s peak earnings of $68.44 billion generated in 2011. In addition, the 2016 figure is the lowest in ten years and the fifth lowest in the 18 years covered by NEITI’s audit reports so far (1999 to 2016).
According to the NEITI 2016 Oil and Gas Industry Audit Report, obtained by BusinessDay on Friday, the plunge in revenue in 2016 resulted from the double whammy of low oil prices in the global market and reduced oil production in Nigeria, which in turn was caused by disruption and vandalism of oil assets and spike in crude theft, among others.
According to NEITI report, yearly average price of crude oil per barrel was $43.73 in 2016 as against $52.5 in 2015. Also, total oil production in 2016 was 659 million barrels as against 776 million barrels produced in 2015, a fall of 15 percent.
Losses due to crude oil theft and sabotage rose from 27 million barrels in 2015 to 101 million barrels in 2016, an increase of 274 percent. This was aside losses due to deferment, which in 2016 was put at 144 million barrels which also went up by 65 percent when compared to the 87.5 million barrels in 2015.
“The bombing of the under-water 48-inch Forcados Oil Loading/Export Pipeline was one of many major occurrences that befell the industry in the year under review,” the NEITI report stated.
“This incident occurred in February 2016 and the line remained in-operational for seven months. Shell Petroleum Development Company (SPDC) declared force majeure on lifting from Forcados on 21st February 2016. Companies injecting into the Forcados Terminal such as SEPLAT, PANOCEAN, MIDWESTERN, ENERGIA, PLATFORM, PILLAR, WALTERSMITH, and EXCEL shut down production for over 147 days.”
In addition, SPDC declared force majeure on the Bonny Terminal due to a leak in Nembe Creek Pipeline between May and July 2016 while NAOC declared force majeure on the Brass Terminal between July and August 2016.
Similarly, Mobil Producing Nigeria Unlimited declared Force Majeure twice between May/June and July/October 2016. This was due to a drilling process disruption and damage to the QIT loading system. The NEITI report stated that: “MPN’s total production within the four-month period was 4,616,825bbls, which is less than half of what was produced in each month previously as reflected in DPR reconciled sign-off records”.
After surviving the slump in the global oil market in 2008 and 2009, Nigeria’s oil sector rebounded in 2010 with a 49 percent increase in total financial flows to $44.94 billion, followed by the peak of $68.44 billion in 2011.
However, flows from the sector have been trending downward since that peak year with $62.94 billion generated in 2012, $58.08 billion in 2013, $54.56 billion in 2014, and $24.79 billion in 2015. Similarly, oil production has been on a steady decline with 866 million barrels produced in 2012, 800 million barrels in 2013, 798 million barrels in 2014, 776 million barrels in 2015 and 659 million barrels in 2016.
NEITI’s audit reports independently reconcile payments by companies against receipts by government agencies, and cover key financial flows such as earnings from sale of Federation’s crude oil and gas, sector-specific taxes, fees and levies such as royalty, Petroleum Profit Tax (PPT), signature bonus, gas flared penalty, and other flows such as NDDC contribution, NCDMB levy, NESS fees, education tax and others. Breakdown of the payment shows that the major earnings for 2016 came from export and domestic sale of Federation crude oil and gas with $7.97 billion, petroleum profit tax PPT at $4.21 billion, and royalty oil at $1.57 billion.
HARRISON EDEH, ABUJA
