FG Loses $100bn in Five Years to Crude Oil Production Shortages

The federal government has lost an estimated $100 billion in revenue between 2007 and 2012 from its inability to meet crude oil production targets, according to data sourced from the National Petroleum Investment and Management Services (NAPIMS), the investment arm of the Nigerian National Petroleum Corporation (NNPC).

The inability to meet NNPC’s internal projections, which however differed from the federal government’s budget projections, was due to militant’s attacks on oil workers and facilities before the amnesty programme; crude oil theft; and lack of investment by the operators arising from the non-passage of the Petroleum Industry Bill (PIB).

The data reveals that except for 2007 when the federal government achieved its projected target of two million barrels per day at crude oil price of $74.48 per barrel, projections from 2008 to 2012 were not actualised, resulting to loss of $100 billion in revenue, according to the prevailing international market price of crude oil.

According to the data, the difference between the projected production and actual production in 2008 was 100,000 barrels per day at oil price of $101.14 per barrel; 800,000 barrels per day in 2009 at a price of $63.90 per barrel and 500,000 barrels per day at a price of $80.92 per barrel in 2010.

The country also lost 600,000 barrels per day at a price of $113.76 per barrel between the projected figure of 3.10 million barrels per day and the actual production of 2.5 million bpd in 2011.
The data also revealed that the country lost 1.2million barrels per day at a price of $114.41 per barrel between the projected target of 3.6 million barrels per day and the actual production of 2.4 million barrels per day achieved in 2012.

In 2008, the federal government projected 1.9 million barrels per day at oil price of $101.14 per barrel but achieved 1.80 million barrels per day.

The production target for 2009 was 2.80 million barrels per day at international market price of $63.90 per barrel but actual production averaged two million barrels per day, according to the data.
The government also projected 3.1million barrels per day at oil price of $80.92 per barrel in 2010 and achieved 2.6 million barrels per day, the data revealed.

In 2011, the target was 3.10 million bpd at a price of $113.76 per barrel but 2.5million bpd was realised, leaving a shortfall of 600,000 barrels per day.
The target for 2012 was 3.6million barrels per day at a price of $114.41 per barrel but only 2.4million barrels per day was actualised, leaving a gap of 1.2 million barrels per day.

While the inability of the government to meet the production targets before the amnesty programme was blamed on militant attacks on oil and gas infrastructure in the Niger Delta, the post-amnesty shortfalls were blamed on crude oil theft and absence of investment due to the non-passage of the PIB.
With the non-passage of the PIB to make the operating environment predictable, there were not only production shortfalls but also stagnation of new discoveries and reserves.

The administration of former President Olusegun Obasanjo had set a production target of four million barrels per day and reserves target of 40 billion barrels for 2010 but these targets are yet to be achieved in 2013.
The NNPC recently admitted that the daily crude oil production in the first quarter of 2013 fluctuated between 2.1 and 2.3 million barrels per day (mbpd) compared with the projected estimate of 2.48 million bpd in the 2013 budget.

This shortfall between actual production and forecast in first quarter 2013 resulted in a drop in crude oil revenue of about $1.23 billion, or N191 billion that should have accrued to the Federation Account.
It was gathered that the long contracting cycle of about 36 months institutionalised by the NNPC between 2007 and 2012 was said to have also contributed in stifling investments as foreign investors relocated their investments especially to Angola, where the national oil company, Sonagol had put more efficient systems in place to limit the contracting cycle to six months.

Concern had also heightened that the PIB might not address the key industry challenges as the debate has been concentrated on more trivial issues of the 10 per cent Host Community Fund and fiscal terms that would increase government take, leaving more sensitive issues that would engender investment.

Curled from This Day

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