Nigeria Loses $150bn in 6 Years from Unproduced Oil

Nigeria has suffered a massive $150 billion loss between 2007 and last year, on account of unproduced crude oil, resulting from gross mismanagement of the country’s oil industry, a BusinessDay investigation has shown.

The $150 billion in lost production revenues means each Nigerian lost $898 or N141, 916 based on a population of 167 million Nigerians at the end of 2012. The sum is enough to build a considerable number of power plants with total output of 150,000 MW, based on global standard measure of $1 billion for 1,000 MW.

Again, it is enough to cut Nigeria’s housing deficit by 40 percent. The World Bank has estimated that the cost of bridging Nigeria’s 17 million housing deficit is N59.5 trillion. The sum is also sufficient to pave 23,734 km of roads. The average cost of building grade A paved roads in Nigeria is N1 billion ($6.32 million) per one kilometer, according to data from BusinessDay’s Research unit.

The BusinessDay  investigation showed that although international oil prices were rising, poor response and general mismanagement of the oil industry meant that Nigeria could not take full advantage of the swings in oil price, as actual oil production levels constantly remained below targets set in the annual national budget.
In the six years for which actual oil production figures and average international prices were analysed by our editors, it was discovered that in 2007 when oil prices averaged $74.48 per barrel, Nigeria set for itself a projected oil production target of 2 million barrels per day, (mbd) and actual production data released by government indicated that oil was pumped out at about that same level of 2mbd as planned.

In 2008, the country failed to meet her daily projected oil production target of 1.9mbd, although international oil prices averaged a whopping  $101.14 per barrel, that year.

The picture of the rot in the system became even more frightening in 2009. That year, the oil production target set in the federal budget was an ambitious 2.8mbd but actual production was woefully low, at only 2.120mbd,  resulting in $17.726 billion in lost national revenues that year alone.

The loss for 2010 was even worse. The national budget set a target of 3.10mbd in oil production but actual production averaged only 2.453mbd, according to government’s own data. This led to lost national revenues of $19.593bn in that year alone.

According to our investigation, in 2011, the total national loss came to $23.668bn. In a year when the rest of the world scrambled to produce more oil, to take advantage of the average oil price of $113.76 per barrel, Nigeria managed to record a daily average of 2.457mbd of the target of 3.10mbd.

The level of lost national revenues peaked last year, the same year the NNPC surprisingly announced that it had reached an unprecedented daily oil production level of 2.7mb. Nigeria lost about $60bn in unproduced crude oil, as actual daily oil production for the year averaged a mere 2.056mb, according to Central Bank of Nigeria (CBN) data. It was the same year that the country set a production target of 3.60mbd but actual production was only 58.4 per cent of the set target.

Analysts spoken to by our reporters said when the value of jobs that the nation failed to create, as well as the other multiplier effects that should have accrued to the national economy are computed, the total loss would go well above $150bn for the period 2007-2012.

“There is need for Nigeria to get its act together by way of investments in the industry,” says Diran Fawibe, chairman and chief executive officer, International Energy Services Limited.

“At a time, we had 37 billion barrels of reserves and the projection was that by 2010, we should have 40 billion barrels of reserves. But because there was minimal or no investment, that target was not met.”
Duncan Clarke, Head of African oil experts Global Pacific & Partners, says “Nigeria has multiple problems in its oil sector and it has failed to meet reserve growth and production targets for many years … while competition grows worldwide.”

Clarke adds that “high crude prices have shielded Nigeria of late, but this may not last forever, and its reputation as the proverbial Land-of-No-Tomorrow continues.”

Added to the billions in unproduced crude oil, is the estimated $5billion which Nigeria loses yearly to crude theft, and now off-shore piracy is rising, with oil majors now saying that their operating costs are among the most expensive globally.


culled from Thisday