The combined bank borrowing to oil firms operating in the downstream and upstream subsectors of the Nigerian oil and gas industry was N5.93tn as of June 2022, according to data from the Central Bank of Nigeria.
While operators in the downstream, natural gas and crude oil refining subsector owed banks N4.28tn, operators in the upstream and services subsectors were indebted to banks to the tune of N1.65tn. This shows an increase of N250bn from the total debt of N5.68tn in December 2021. The Petroleum and Natural Gas Senior Staff Association of Nigeria had, in March, raised the alarm over the huge losses incurred by operators in the oil and gas industry as a result of vandalism and oil theft.
The President of PENGASSAN, Festus Osifo, said between October 2021 and February 2022, over 90 per cent of crude oil pumped into the Trans National Pipeline by operators was vandalised. This, he noted, had made Nigeria lose out on accruing more revenue in spite of the current high price of crude oil in the international market. Osifo said another problem arising from vandalism was that companies were being forced to go into curtailment when the assets/export pipelines were damaged as they could not export what they produced, thereby incurring production losses.
According to him, each operator in the sector loses an average of 10 days of production shut-in monthly due to vandalism. In a bid to offset the growing costs, he said companies in the sector had been forced to turn to financial institutions.
He added, “The operating cost of oil and gas firms, both those in the downstream and upstream sub-sectors, is very high now, particularly because of issues of vandalism and security. You will see that because of insecurity problems, many of these companies, both onshore and offshore employ the services of heavy security personnel to safeguard their equipment. Sometimes even their staff has to be secured. This additional security costs a lot of money, and this is affecting their bottom-line. On the issue of vandalism, I have observed that a lot of these firms are being harassed by their host communities, which is why they improve their CSRs and give back to these communities.”
Earlier this month, the House of Representatives had decried the growing spate of oil theft in Nigeria, warning that it might ground the economy if it remained unabated.
The Minority Caucus in the House, in a statement recently issued, said it was alarmed by the massive oil theft in Nigeria.