10 problems in Nigeria oil and gas industry and possible solutions

Ever since the earth inhabited, mankind and other living creature have depended on things that exist freely in nature to survive.These things include water, land, soils, rocks, forests (vegetation), animals (including fish), fossil fuels and minerals. They are called Natural Resources and are the basis of life on earth.

Nigeria has an abundance of natural resources, especially hydrocarbons. It is the 10th largest oil producer in the world and the third largest in Africa. Oil revenues account for about 95% of Nigeria’s foreign exchange earnings.

Most of the crude oil in Nigeria comes from numerous, small, producing fields, located in the swamps of the Niger Delta, Anambra State, Benue State, Trough, Chad Basin, and Benin and product is exported through 7 terminals, and a number of floating production vessels.

10 problems in Nigeria oil and gas industry and possible solutions

There are estimates of about 606 oil fields, most with less than 100 million bbls of extractable reserves. Marginal oil fields are also known. It is estimated that Nigeria has about 176 trillion cubic feet (Tcf) of proven natural gas reserves.

However the lack of a gas infrastructure, means that about 75% of associated gas is flared and only 12% re-injected.

The key environmental issues in the Niger Delta of Nigeria relate to its petroleum industry. The carelessness of the oil industry has also precipitated this situation, which can perhaps be best encapsulated by a 1983 report issued by the NNPC, long before popular unrest surfaced “We witnessed the slow poisoning of the waters of this country and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operations.

But since the inception of the oil industry in Nigeria, more than twenty-five years ago, there has been no concerned and effective effort on the part of the government, let alone the oil operators, to control environmental problems associated with the industry.

Read Also: Top 10 Highest Oil Producing Countries in Africa

10 problems in Nigeria oil and gas industry

Below are the major top 10 problem affecting Nigeria oil and gas industry:

1. Oil spills in Niger Delta

Reports on the extent of the oil spills vary. The Department of Petroleum Resources estimated 1.89 million barrels of petroleum were spilled into the Niger Delta between 1976 and 1996 out of a total of 2.4 million barrels spilled in 4,835 incidents. (approximately 220 thousand cubic metres).

A UNDP report states that there have been a total of 6,817 oil spills between 1976 and 2001, which account for a loss of three million barrels of oil, of which more than 70% was not recovered. 69% of these spills occurred off-shore, a quarter was in swamps and 6% spilled on land. Oil spills are a common event in Nigeria.

Half of all spills occur due to pipeline and tanker accidents (50%), other causes include sabotage (28%) and oil production operations (21%), with 1% of the spills being accounted for by inadequate or non-functional production equipment. Corrosion of pipelines and tankers is the rupturing or leaking of old production infrastructures that often do not receive inspection and maintenance.

2, Pipeline vandalism

Pipeline Vandalism is “action involving deliberate destruction of or damage to petroleum pipelines with the sole aim of stealing crude oil and associated petroleum products.

In the Nigerian oil & gas industry, the effects of pipeline vandalism among others include huge economic losses from pipeline & plant shutdown, environmental pollution, fire outbreaks usually resulting in loss of lives. Scarcity & shortage of petroleum products as well as decrease in electricity.

Read Also: Causes And Effects Of Pipeline Vandalism In Nigeria

3, Crude oil theft

On daily basis, Nigeria still loses over 1 million barrels to corporate oil thieves. Unknown to Nigerians, for several years, oil companies based their total production figures on unconfirmed volume estimates, using dipsticks to make volume calculations.

This method of calculation is easily susceptible to manipulation by mere altering of the physical properties of the crude at the export terminal facilities. At different times in our recent past, figures ranging between 200,000- 1,200,000 barrels were dangled as the volume of crude oil stolen from Nigeria on daily basis.

Molecular Power System (a due diligence company), was engaged to provide technical data (records of crude oil and liquefied natural gas lifting in Nigeria as obtained from the NNPC, and landing certificates at global destinations) to verify possibilities of non-declaration to the federal government by multinational companies.

Investigations undertaken by this consortium, established as suspected, that crude oil declared to have been exported from Nigeria between January 2011 and December 2014 was less than what was declared to have been imported into the United States of America, a country that maintains detailed records and has stricter compliance.

As reported by company, a liquefied natural gas shortfall of 727,460 metric tonnes from shipments to seven countries estimated at over $461 million was established. The revenue loss, was traced to cargoes at each destination port of entry, and was established as undeclared cargo. The tracing was found in 51 countries where Nigerian LNG was exported but undeclared, with the US again being the largest receiver.

4. Pollution

Pollution is the introduction of contaminants into the natural environment that cause adverse change. In Nigeria, the slow poisoning of the waters of the Niger Delta region and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operation is beyond rhetoric.

There has been no concerned and effective effort on the part of the government or the oil operators, to control environmental problems associated with the industry.

A United Nations Development Programme (UNDP) report shows that there have been a total of 6,817 oil spills between 1976 and 2001, which account for a loss of three million barrels of oil, of which more than 70% was not recovered; 69% of these spills occurred offshore, a quarter which was in swamps and 6% spilled on land.

5. Kidnapping

More than 200 foreigners have been kidnapped even though the Nigerian Navy has been able to control the attacks, they still continue to occur.

Read Also: 10 Problems of Kidnapping in Nigeria

6. Fuel Pricing

According to the Minister of state for petroleum resources, one of the greatest challenges facing Nigeria is the pricing of petroleum products. Speaking at a special session at the ongoing Nigeria International Petroleum Summit (NIPS) in Abuja, Kachikwu said that unless the problem of appropriate petrol and gas pricing was addressed, fixing the existing refineries and encouraging private investors to build new ones would not solve the country’s downstream problems.

He said the price of petrol rises when the price of crude oil goes up in the international market, stressing that in such instances, Nigeria spends more to import refined products.

He said: “Rising prices in international market affecting domestic prices. What the country needs is to have the refineries working. It’s a shame that after 40 years, Nigeria cannot produce its domestic consumption. “It would take 18 months to address problems of scarcity, price stability and other issues relating to supply of petroleum products.

7. Inadequate pipeline Infrastructure

The Department of Petroleum Resources Director, Mordecai Laden has once said inadequate gas pipeline infrastructure is our major challenge in the domestic gas supply and market growth.”

He recalled that the available gas infrastructure in the country was largely limited to the Escravos Lagos Pipeline System, ELPS, adding that most of the other gas pipelines were project specific, point-to-point and lacks flexibility.

8. Fire outbreak

Nigeria Oil Production has killed over 2000 people from fire outbreaks to diseased water caused by oil spillage. This spillage is allegedly up to 540 million gallons and it may cost 100,000,000 dollars to clean up.

10. Unreliable gas supply

10. Poor gas funding

Possible solution to the problems in Nigeria oil and gas industry

 Adequate infrastructure

  1. Adequate security
  2. Affordable fuel pricing
  3. Consistency funding
  4. Reliable gas supply
  5. Non interference in the role of the Nigerian National Petroleum Corporation (NNPC) in the performance of their mandates.

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