There are countries which have nothing (in terms of natural resources) and which, despite everything, have managed to achieve economic prosperity (for example Japan). Then there are others who, having enormous natural resources, not only failed to take advantage of them, but even became a source of conflict and corruption. This is for example the case of Nigeria, which, with one of the largest oil reserves in the world, is incapable of progressing economically. Firstly because the profits from oil go to a few, but also because its management will go down in history as one of the most disastrous. Nigeria produces about 1.2 million barrels of oil per daybut its potential is much greater. For example, the United States, which has similar proven crude oil reserves, produces more than 13 million barrels per day. Why is there this big difference? The cause is probably multifactorial, but poor management is undoubtedly one of the reasons.
Nigeria lost 362 million barrels (mbbl) of crude oil between 2014 and 2023. due to measurement errors, sabotage and production adjustments (due to plant breakdowns, for example), according to a new report released by Nigerian Extractive Industries Transparency (NEITI). It was the body, which aims to promote transparency and accountability in the management of the country’s oil, gas and mining revenues, that revealed the African nation’s daily crude oil losses. However, looking at other reports from the organization, we can see how serious and how long-standing this problem is: If the calculation is made between 2009 and 2020, the losses amount to almost 700 million barrels..
When we talk about Nigeria, we are talking about the tenth country in the world in terms of proven oil reserves, with 37 billion barrels. However, behind this “sea of oil” lie decades of internal conflicts that have left the national infrastructure totally exposed to all kinds of problems, which has scared away national and international investments (no one dares to invest in Nigeria) . In short, no matter how much “black gold” flows in its bowels, no one is betting their money on extracting it.
Nigeria has been grappling with chronic management challenges in maximizing its oil (although it produces crude oil, it suffers from a chronic fuel deficit) and gas potential as an oil-producing country for several decades. For example, the Nigerian military recently intercepted and disrupted a major illegal oil refueling operation in the southern region of the country: Last month, several local media outlets reported that the Nigerian military had discovered more than 198,000 liters of stolen crude oil. on a barge in Rivers State.
Earlier this year, Mele Kyari, CEO of NNPC, highlighted efforts by the state-owned company (NNPC) to eliminate corruption from its operations, end crude oil theft and prevent pipeline vandalism. Crude oil theft is the most serious and widespread economic crime in Nigeriagiven the amount of oil stolen daily and the “audacity with which the perpetrators operate,” the executive asserts.
The crude oil loss report was carried out by reviewing various sources, including submissions from the Nigerian Upstream Petroleum Regulatory Commission during the NEITI audit period and reports endorsed by companies such as the Nigerian National Petroleum Company (NNPC). NEITI defines postponement as a disruption in production due to planned and unplanned repairs and maintenance, pipeline breaks or leaks, or inadequate equipment performance.
Sabotage and oil theft
There are two fundamental factors, one is the physical insecurity of the factories, which are attacked by armed groups to finance themselves through crude oil and the other is the poor maintenance of its infrastructurewhich results in a total waste of its resources. Starting with the first, The armed groups that engage in sabotage against oil pipelines are varied. ThinkTank Strauscenter comments that “the ups and downs in Nigerian oil production due to instability and crude theft (often called “bunkering”) appear to represent a serious problem for the Nigerian government.”
In this sense, ThinkTank experts point out that it is located in the richest crude oil area in the country, southern Niger Deltawhere most of the organizations that implement these practices have emerged. Of particular note is the Niger Delta Emancipation Movement, which “disrupted oil production and kidnapped workers.” Additionally, radical Islamic groups such as Boko Haram carry out similar attacks, albeit to a lesser extent.
This has been a problem since the beginning of the oil industry, but since 2016 it has accelerated and today it is still a very present problem. An example of this is that that year, the group known as the “Delta Avengers” shut down activity on the country’s largest oil pipeline for more than a year. “Most oil spills in the Niger Delta continue to be caused by crude oil theft.sabotage of oil and gas production facilities and illegal oil refining, including the distribution of illegally refined products,” Shell comments.
This is still the basis of the great problem that Nigeria is going through, a vicious cycle that begins with an attack or theft in their oil installationslack of maintenance, lack of financial resources and starting again. Faced with this situation, companies are not making new investments in the country due to fear and insecurity, while at the same time they have to pay a significant cost to repair the damage caused to infrastructure by spills.
There is no money to repair the breakdowns
The Nigerian National Petroleum Corporation admitted at a press conference last August that You simply don’t have the funds to repair all the leaks in your system.. Some leaks causing it to keep losing oil. The trend is still very much alive since according to the Petroleum Regulatory Commission Upstream In Nigeria, its pipelines lost more than three million barrels of oil in the first five months of this year.
From Nigeria, they have tried to take steps to make their oil sector more attractive and to attract foreign capital to turn things around. This is why they approved in 2021 the Petroleum Industry Lawbut the reality is that since then, they have already left Shell, Exxon, Enni, Equinor and Adaxtired of the problems of the African country.
All these problems led the country’s national oil company to issue a strong message this summer: “We have declared war on the challenges affecting our crude oil production. War means war. We have the right tools. We know what to fight against. “Fight,” said Mele Kyari, executive director of the NNPC. The senior official defended that with the same platforms that are currently operating they could reach 2 million barrels of oil per day. It remains to be seen whether they will be able to turn the situation around or whether their oil will continue to disappear.engulfed by the chaos of attacks and failing infrastructure.
