International oil companies operating in the Niger Delta region are not thinking about pulling out from Nigeria at the moment despite the continued bombing and destruction of their facilities by militants in the area.
However, some of the IOCs plan increased production shut-ins, particularly in areas that are worst hit by the activities of the militant group, Niger Delta Avengers.
On Friday, the NDA bombed a pipeline belonging to the Nigerian Agip Oil Company in Brass Local Government Area of Bayelsa State.
The group had carried out series of bombings that had reduced Nigeria’s crude oil production by
close to one million barrels per day, and had rebuffed any discussion with the Federal Government on ways to address it grievances.
A senior official of one of the affected oil majors operating in the Niger Delta told one of our correspondents on Saturday that although the bombings had shown no sign of stopping, his firm had yet to consider pulling out of Nigeria, although it had scaled down its operations in the area.
“We are not thinking of pulling out of Nigeria for I’ve never heard it and I don’t have an answer to say that we are pulling out from the country. However, this does not mean that we won’t shut operations in areas where explosions and destruction are high,” the official, who spoke to our correspondent on condition of anonymity, said.
The Managing Director, Shell Petroleum Development Company of Nigeria Limited and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, told our correspondent last month, “Shell is not leaving Nigeria. Our strategy in Nigeria is to optimise our onshore oil footprint, while making further investments in other growth areas, particularly in deep water and the gas value chain, including domestic gas.”
When asked if the company was considering pulling out amid the increased hostility in the Niger Delta, Chevron’s General Manager, Policies, Government and Public Affairs, Deji Haastrup, said, “We will not be making any comment at this time.”
In its latest financial and operations report, the Nigerian National Petroleum Corporation explained that the recent upsurge in vandalism had negatively impacted on the country’s crude oil production output, making it to lose its African top crude oil producer status to Angola.
According to the corporation, about 380,000 barrels of crude oil per day remained shut-in due to vandalism of the 48-inch sub-sea export line on February 15, 2016.
“Also, the nation has lost over 1,500 megawatts of power supply to the damage as gas supply from Forcados, which is Nigeria’s major artery, accounts for 40 to 50 per cent of gas production. Incessant pipeline vandalism poses the greatest threat to the industry,” the NNPC said.
Chevron, Shell and Eni, the parent company of Nigeria Agip Oil Company, have been hard hit by the attacks by militants in the Niger Delta, home to most of the nation’s oil and gas production.
Currently, three of the nation’s five largest export streams, Forcados, Bonny Light and Brass River, have been totally suspended as a result of the attacks.
On Wednesday, Shell Petroleum Development Company of Nigeria Limited shut the Trans Niger Pipeline, which transports around 180,000 barrels of crude oil per day to the Bonny Export Terminal, after a leak was found.
Crude oil production in the country has dropped to about 1.4 million barrels per day from 2.2 million bpd, upon which the Federal Government assumed an oil revenue of N820bn at $38 per barrel benchmark price.
The sabotage of oil and gas infrastructure in recent months has contributed to a significant decline in production levels, and loss of revenue by government and oil companies.
According to the Managing Director, Frontier Oil Limited, an oil and gas field developing firm, Mr. Dada Thomas, it makes no business sense trying to earn income when one lacks the guarantee of staying alive to enjoy the revenue.
He said although the IOCs might not pull out immediately from Nigeria, if in the long term nothing meaningful was done to address the menace of the militants, the option of divesting might surface later.
Thomas said, “People only want to invest in an area where they can make money and enjoy their returns. This is a simple business strategy. There’s no point trying to make money if you are going to die in the next minute. It doesn’t make sense.
“Now, the solution to this trouble has to be a carrot and stick approach. There must be engagement, because to some extent there is a political arm to this menace. But is it criminality and that is why we must adopt a carrot and stick approach. Let the people know that I’m willing to engage but this engagement will be with legitimate people who can put the interest of their people on the table.”
Prof. Wumi Iledare of the International Association of Energy Economics stated that the IOCs would not just pull out from the country because of their level of investments, adding that many of them were operating based on shared contracts with the Federal Government.
He said, “I don’t think divestment by oil majors is something that can just happen quickly; where are you divesting to and who will want to come and buy those assets? However, many of them are operating on PSC (Production Sharing Contract) terms and it helps them in recovering their cost.
“However, if I am an investor, I will think twice before I invest in a place where my assets are not secured. But you should know that some of these oil companies have operated in a more hostile environment. It, however, does not mean that they don’t record losses as a result of the criminality in the region. So, what we need to do is to find a way to stop this criminality.”
The Chief Executive Officer, Gacmork Nigeria Limited and ex-Chevron executive, Mr. Alex Neyin, said, “We are already faced with reduced production. We are already faced with reduced gas to run our power plants. Some of the IOCs have already shut some of their operations and evacuated a number of their workers in the Niger Delta. But I don’t think they will pull out of the country.”
“If they (militants) wipe out their installations, the IOCs will leave. And there are documents showing force majeure. When there is force majeure, any expense they incur goes back to the government. If they cannot meet their shipping obligations, it goes back to the government.”
Source: Punch
