Nigeria's Oil, Gas Sector Earned Over U.S.$21 Billion in 2017 - NEITI Report

28 November 2019

Nigeria realised about $21 billion from the oil and gas sector in 2017, the Nigeria Extractive Industries Transparency Initiative (NEITI) has disclosed in its latest audit report.

The report showed the revenue was 23 per cent higher than the $17.05 billion realised in 2016.

The figure was however lower by about 15 per cent than the $24.79 billion inflows in 2015.

Details of the report on the various revenue streams showed that crude oil and gas sales raked in about $10.19 billion, against other earnings of about $10.13 billion.

The 2017 report covered 63 entities, including seven government agencies, 12 joint venture companies, 13 production sharing contract companies and 16 marginal field operators.

Others entities covered included 13 sole risk operators, one service contract and the NLNG Company.

Reconciled financial flows

The NEITI Audit report independently reconciled financial and physical flows from activities and transactions that took place in Nigeria's oil and gas sector for the 2017 fiscal year.

Between 2013 and 2016, the report stated, the yearly inflows from the oil and gas sector declined steadily, with the sharpest drop of 55 per cent recorded in 2015 compared to the preceding year.

The report also showed that inflows from Nigeria Liquefied Natural Gas as dividend, interest and loan repayment were $834million, an increase of over 114 per cent from about $390 million in 2016

On crude oil production during the period, the report showed a marginal increase of about 4.75 per cent (about 690,465 million barrels) as against the 659,137 million barrels produced in 2016.

The report said the significant increase in revenues when compared to increased production volumes was attributed to a 24.5 per cent increase in average crude oil prices from $54.44 in 2017 to $43.73 in 2016.

NEITI said out of the 690.465 million barrels of crude oil produced in 2017, about 688.291 million barrels were lifted, a marginal increase from the 668.147 million barrels lifted in 2016.

Crude oil produced, lifted

Other details in the report included that the Nigerian National Petroleum Corporation (NNPC) lifted about 241 million barrels of crude oil on behalf of the federation.

A breakdown of the liftings showed that federation exports accounted for 135 million barrels, while the domestic crude liftings accounted for 106 million barrels.

The report further disclosed that the federation exports volume went down by 36 per cent from 211 million barrels in 2016 to 135 million barrels in 2017.

While liftings by the companies was about 447million barrels, joint venture operations, production sharing contracts and sole risk operators accounted for 130 million barrels, 223 million barrels and 79 million barrels respectively.

Also, marginal field and service contract operators lifted 15 million barrels and one million barrels respectively during the year under review.

On crude allocation for domestic crude refining, the report said the NNPC allocated about 105.925 million barrels for that purpose in 2017, while only 25 per cent of that volume was supplied to the refineries, and 69 per cent utilised for the Direct-Sales and Direct-Purchase arrangement.

Key findings

One of the key findings of the report, the NEITI noted, was that despite the improved performance of the oil and gas sector in 2017 compared to 2016, the projected production volumes were not realised.

"The reduction in projected production figures due to unscheduled maintenance and repair of equipment posed a challenge to production in the year under review," the report said.

Other reasons for the reduction were deferred production due to turn around maintenance, vandalism and pipeline integrity issues.

On production arrangements in terms of volumes, the joint ventures and production sharing contracts produced a total of about 305 million barrels and 303 million barrels.

Other contracts such as service contracts, marginal fields and sole risks accounted for the balance. The report said the "Sole Risk operations produced the highest percentage increase of 114 per cent, while Marginal Field operations production grew by about 32 per cent during the year."

"Overall production from the JV companies increased by 16.199 million barrels, indicating a 6 per cent increase from 2016 volumes.

"On the contrary, PSC and SC operations suffered volume reductions of six per cent and 31 per cent respectively".

In terms of production, the NEIT report said total gas production was about 3,494,774 trillion metric standard cubic feet (TSCF) from all arrangement in 2017, slightly higher than 2016 production of 3,051,249 (TSCF) by 15 per cent.

The total volume of gas flared in 2017 increased by 23 per cent, while gas utilisation jumped significantly by 32 per cent compared to 2016 volumes.

In addition, the report said out of about $8.474 billion budgeted for Cash Call obligations, only 49 per cent, or $4.13billion, was paid as at January 2018.

Similarly, out of the $5.125 billion negotiated as outstanding cash call liabilities for 2016, $2.177 billion was paid, therefore, leaving a balance of $2.948billion.

Crude oil theft, sabotage

On crude oil theft, sabotage and others, the NEITI said 2017 witnessed a huge drop in these incidences and deferred production.

"Nigeria lost about 36.5 million barrels of crude oil to theft and sabotage, while there was 69 million barrels lost due to decrease in production volumes resulting from routine maintenances or unplanned repairs of the production facilities."

The figure reflects a remarkable improvement when compared to the 2016 figures of 101 million barrels and 144 million barrels lost to theft and deferred production respectively.

NEITI also noted there was a reduction in pipeline breaks in 2017 (924 incidents) compared to 3,571 incidents in 2013; 3,732 in 2014; 2,832 in 2015 and 2,589 in 2016.

The report further showed that the oil and gas sector contributed 8.68 per cent to Nigeria's Gross Domestic Product (GDP).

Recommendations

In the report, NEITI recommended that the Department of Petroleum Resources (DPR) should investigate the non-payment of royalties by IOCs and recover $594.38million from the affected companies.

The agency said the Seismic sensors should be installed along the pipeline network to alert security operatives on the activities around the pipelines in order to eliminate pipeline breaks, sabotage and product theft.

Also, the report revisited the recommendations made in reports of previous years.

NEITI said it expects the 2018 audit report to be ready by early 2020.

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