Data from the Central Bank of Nigeria (CBN) indicates that oil firms operating in both the downstream and upstream subsectors of the Nigerian oil and gas industry owe banks a total of N5.93 trillion as of June 2022. Specifically, operators in the downstream, natural gas, and crude oil refining subsector are responsible for N4.28 trillion of this debt, while those in the upstream and services subsectors are indebted to the tune of N1.65 trillion. This represents an increase of N250 billion from the total debt of N5.68 trillion recorded in December 2021.
In March, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) raised concerns about the significant losses faced by operators in the oil and gas industry due to vandalism and oil theft. The association’s president, Festus Osifo, revealed that over 90 percent of the crude oil pumped into the Trans National Pipeline by operators between October 2021 and February 2022 was vandalized. This vandalism has resulted in Nigeria missing out on potential revenue, especially given the current high prices of crude oil in the international market.
Osifo further explained that vandalism has forced companies to curtail operations when their assets and export pipelines are damaged, preventing them from exporting their produced oil and leading to production losses. He noted that, on average, each operator in the sector experiences about 10 days of production shutdown each month due to vandalism. Preliminary investigations have shown that approximately 150 illegal tap points have been used to siphon crude oil from the Trans National Pipeline.
The operating costs for oil and gas firms, both in the downstream and upstream subsectors, have risen significantly, primarily due to issues related to vandalism and security. Many companies, both onshore and offshore, have had to employ heavy security personnel to protect their equipment and ensure the safety of their staff. This additional security comes at a high cost, which adversely affects their financial performance. Osifo also observed that many firms are facing harassment from their host communities, prompting them to enhance their corporate social responsibility (CSR) initiatives and contribute more to these communities.
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