The oil firms operating in the downstream and upstream subsectors of the Nigerian Oil and gas industry have had to increase their combined bank borrowing from N5.91 trillion in January 2021 to N5.68 trillion in December 2021, showing an increase of about N490bn due to increased vandalism and oil theft in the economy.
Downstream operators, natural gas and crude oil refining subsectors have had to borrow N290 billion from the Nigerian banks in 2021 amidst the rises in the global crude oil prices. Thus, increasing the debt portfolio by the oil and gas companies to N4.21 trillion in December 2021 from N3.92 trillion in January 2021, according to the data obtained from the Central Bank of Nigeria, statistical Bulletin.
For the upstream operators, their total borrowing in December 2021 rose to about 1.47 trillion, bringing the collective debt of the upstream and downstream operators to N5.68 trillion in December 2021. This represents about 23.3 percent of the N24.38trillion loan advance to the private sector by the apex bank as the sectoral deposit money banks credit to the private sector.
However, in March, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) had raised concerns over the huge losses incurred by operators in the oil and gas industry as a result of vandalism and oil theft.
The President of the association (PENGASSAN), Festus Osifo noted that between October 2021 and February 2022, over 90 percent of the crude oil pumped into the Trans National Pipeline by operators was vandalised. Thus, contributing to the loses faced by the country, in spite of the high crude oil prices prevalent in the international market.
The President also noted that the oil companies were coerced to go into curtailment when the assess and export pipelines were damaged as they could not export what they produced, thereby incurring production losses.
According to Osifo, each operator in the sector loses an average of 10 days of production shut-in monthly due to vandalism. However, he stated that, “recent preliminary research has shown that about 150 illegal tapping were used in siphoning crude oil from the Trans National Pipeline.”
He said further that, these illegal tapping forced all operators injecting crude into the TNP to suspend export/injection thereby shutting-in production. He made mention of some operators, saying, “For instance, Total Energies and SPDC have stopped production into the Trans National Pipeline (TNP ), while Agip Eni declare force majeure on their brass terminal.”
In addition, he said that, in a bid for these operators to offset the growing costs, they had to turn to financial institutions for help. While noting that the operating cost of both the downstream and upstream operators are very high.
He said, the companies on both onshore and offshore employ the services of heavy security personnel to guide their equipment, which comes at an additional cost to the companies, Thus, affecting their bottom line expenses and profit for the year.
He went further to include that for companies who have joint-venture relationships with the government or the Nigerian National Petroleum Corporation, the government provides what is called “cash call”, a situation where companies who intend to explore an oi well are being given 60 percent of the exploration cost. However, the Federal Government mostly fail in this obligation to