Nigerian National Petroleum Corporation (NNPC) Group Managing Director, Mallam Mele Kyari, Wednesday put the value of crude oil lost to pipeline vandalism in the first six months of 2020 at $48 million.
He also said while 54 million litres of petrol is evacuated daily from depots, NNPC does not know the daily local consumption of the product.
Kyari spoke in Abuja at a hearing on “Exiting Petroleum Subsidy: Ensuring Self-Sufficiency in Domestic Refining of Petroleum Products,” organised by the Senate Joint Committee on Petroleum Resources (Upstream and Downstream).
He, however, said the nation’s loss to vandalism was lower when compared with the past, adding that in 2018 and 2019, the loss to pipeline vandalism stood at $825 million and $725 million respectively.
The reduction in vandalism, the NNPC boss said, was due to the increased surveillance by security agencies.
According to him, pipelines are being destroyed within townships, not in the bush, with the connivance of security agents, security contractors and community leaders.
He explained that the corporation has decided to hand over the pipeline security completely to the security agencies “as it is their work to secure government property.”
On daily local consumption of petrol, Kyari said: “We don’t know how much petrol we consume daily in this country, but we know how much of product is taken out of depots.”
According to him, this year, around 54 million litres of petroluem products are evacuated from the depot daily, but the consumption is somewhere below that.
He added that the NNPC has no knowledge of the amount of products transported through Nigeria’s borders to neighbouring countries.
“It is impossible to know; nobody declares it, and therefore as it crosses, it goes. There are open borders across the West African sub-region. It is impossible to stop cross border supply of products.
“No amount of policing or control that anyone can put in place that can stop that,” he stated.
The NNPC, he added, is working with the Central Bank of Nigeria (CBN) to stabilise forex market so that marketers will access forex at market rate and get fuel at market price.
He said the only way to stop smuggling of petroleum products was to remove subsidy so that the market price could be stable.
“Today, in our effort to ensure price stability in collaboration with the rest of the world, our daily crude oil production is at 1.48 million barrels per day,” he added.
Kyari also stated that the federal government deliberately shut down the three refineries in Kaduna, Warri and Port Harcourt for two reasons.
“One is business decision. There is such a condition that we can only extract 70 to 80 per cent of the value of a crude. It is needless to operate it when you know you will lose 20 per cent of the value.
“Second is that we cannot even guarantee crude oil supply to these lines. From Escravos to Warri and then to Kaduna; Bonny to Okrika, the pipelines are very old. Some are 30 to 40 years old, and have not been replaced, and all the activities of the vandals that happen every day, if you put them under pressure that they are designed for, you cannot guarantee required crude oil supply except they are replaced,” he said.
He blamed the problem on the failure to carry out proper turn around maintenance on the refineries.
“We have not done proper maintenance in the last 30 years, and the cumulative effect is that even when you start it today, it cannot be run optimally.
“You cannot do anything except you replace the pipeline and the cost of replacement is very high. To replace pipeline from Escravos to Kaduna, you need at least $2 billion, and we don’t have that kind of money,” he added.
According to him, the best two refineries, Warri and Port Harcourt, are only producing a little above 25 per cent of their capacity when they were running in 2018.
He said, except for Port Harcourt refinery, which will be partly funded by the federal government because there is provision for it in the 2020 budget, the two others would be fixed by third-party financing.
In his speech, Chairman of the Senate Joint Committee on Petroleum Resources (Upstream and Downstream), Senator Sabo Mohammed, said the time was right for government to stop fuel subsidy.